Loughborough University: Debt-ridden companies with political affiliations are first in line for Government bailouts – new research

Firms that are part of larger groups, firms owned by large numbers of shareholders, labour-intensive firms and firms from harder hit sectors were also found to have a better chance of receiving state money.

The findings have been published in a new paper, A very British state capitalism: Variegation, political connections and bailouts during the COVID-19 crisis.

Researchers from Loughborough University and the University of Exeter, in the UK, and Western University, in Canada, looked at all 1,920 publicly listed companies in Britain and compared those that received government financial support during the COVID-19 pandemic and those that did not.

They found that COVID-19 assistance was unevenly distributed across the nation’s numerous business sectors.

Badly affected sectors – transport, hospitality and support services such as renting and leasing, tour operators, security, and office support – had the highest probability of receiving COVID-19 financial aid from the Government.

The team also found that businesses with large numbers of workers (voters) were also favoured.

Where companies had affiliations with members of parliament, or links to foreign governments, the firms were shown to have a higher likelihood of getting government financing, and also if they had run up excessive debts.

One of the authors Dr Anna Grosman said: “Our study and recent events would suggest that British capitalism has assumed at least some of the features of crony capitalism – more typically associated with emerging markets – whereby taxpayer’s money is used towards private vested interests that can include both businesses and members of the government.

“The British state has assumed a very diverse role in the economy over the years, and at times, more visible and extensive, as is the case presently.

“Questions arise as to whether these features of crony capitalism are there to remain after the crisis or are they temporary adjustments that were necessary to accelerate the process of recovery.”

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