Trade Groups Say EU State Aid Rules Hinder Tech Bailouts

Tech start-ups across Europe are struggling to access coronavirus support schemes because of EU state aid rules, industry groups from several countries say, threatening to undermine Brussels’ attempts to stimulate local rivals to Silicon Valley, reported The Financial Times. 

More than a dozen tech trade groups, including industry associations in France, Germany, the UK and Ireland, have together written to EU commissioner Margrethe Vestager calling for “more flexibility” in member states’ ability to provide “vital” support to lossmaking but innovative small businesses.

National governments in several countries have offered schemes to support R&D or encourage venture capital investment. However, several of these programmes have hit roadblocks in Brussels owing to the EU’s determination that they fall foul of the “undertakings in difficulty” test — a part of European competition law designed to prevent member states from propping up failing businesses with state aid.

Many venture-backed tech start-ups operate at a loss in order to drive faster growth, or have sold a large portion of the company to venture investors in recent years, putting them in technical breach of the rules if they take government support. 

“Only taking the current cash flow into account belittles the economic potential of these start-ups and prevents them from receiving much-needed support,” said the letter to Ms Vestager. “In doing so it can undermine the post-Covid-19 recovery, as it is today’s loss making start-ups which will be the driver for economic and job growth in the future.