Who won? Who lost? The distributional impact of COVID-19 government support for business. Aston Centre for Health and Society Policy Brief.

Government support to business during the pandemic represented an unprecedented peacetime transfer of capital from the public to the private sector. Schemes to support businesses were consistently justified on the basis of broader interests, such as ‘protecting jobs and livelihoods’, but these rather abstract, universal goals potentially gloss over important questions about how government supports to business have been used, and to whose benefit.

In this brief we summarise research examining how different stakeholders at the UK’s largest businesses – board executives, shareholders, and workers – fared during and after the peak of the pandemic. Among other things, the research explored how FTSE 350 companies in receipt of government supports adjusted executive compensation packages and payments to shareholders, how this compared to businesses that did not take government money, and how pay differences between chief executives and ordinary workers changed going into and coming out of the pandemic. In addition, the research looked at government support scheme restrictions on executive pay and capital distributions to shareholders (dividend payments) and examined the challenges involved in tracking which companies had taken advantage of government supports and by how much. Our findings indicate the existence of a post-pandemic restitution culture in executive pay, in which companies across the FTSE 350 have sought to make up losses in executive pay experienced during the peak of the pandemic. This restitution culture has reversed a longer run decline in executive pay and, significantly, is particularly apparent in companies that participated in government support schemes, which have seen substantial executive pay increases.

In a narrow sense, our findings underline the importance of policymakers attaching clear conditions to government support on executive pay and capital distributions to shareholders, with appropriate transparency enforcement mechanisms. However, they also raise bigger questions about the relationship between corporations and society, and the potential role that government assistance, grants, and public procurement can play in ensuring companies and our broader economy are managed in the long-term interests of society.