Executive Summary. Who won? Who lost? The distributional impact of COVID-19 government support for business.

Government support to business during the COVID-19 pandemic was consistently justified on the basis of general interests, such as ‘protecting jobs and livelihoods’ and helping to ‘ease the financial burden for businesses and the UK population’. But these rather abstract, universal goals potentially gloss over important questions about the redistributive effects of government subsidies. Given present efforts to tackling public sector debt, how money under government support schemes has been used, and to whose benefit, are key questions.

In this report we examine 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, we explore 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, we look at government support scheme restrictions on executive pay and capital distributions to shareholders (dividend payments) and examine 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.