The prohibition is intended to prevent state aid from sustaining companies that are not viable in the long run. However, it is unclear whether the criteria in the prohibition are suitable for distinguishing between companies facing temporary difficulties but with future potential, and those that are not viable without state support.
This report documents the scope and characteristics of undertakings in difficulty, assesses whether the current criteria are well-suited to identifying businesses in persistent financial trouble, and investigates whether the prohibition leads to subsidy funds being redirected toward companies that systematically yield lower returns per krone of support.
Overall, the results of this analysis show that the prohibition largely prevents firms with low profit margins and a low probability of survival from receiving support. However, the prohibition also affects some firms that are subject to the rules, but are only experiencing temporary financial difficulties. If there are significant benefits from subsidizing firms in temporary financial trouble, the prohibition could be costly because it would redirect support away from the firms where it could have the greatest impact. Nevertheless, we do not find evidence that support to undertakings in difficulty yields greater effects per krone than support to other firms.