Following the end of the transition period, the UK has a new subsidy control regime. Subsidies are, broadly, defined along similar lines to the EU’s definition of ‘state aid’, possibly including – for example – guarantees and tax benefits, as well as direct grants. Going forward, grantors and recipients of future UK government derived subsidies (such as central and local government, charities, not-for-profits and social enterprises) will need to carry out a legal assessment to ensure compliance. The UK’s new regime contains similar transparency provisions to the existing EU state aid regime enabling interested parties to have visibility over possible unlawful subsidies. In the event of non-compliance, subsidies may be subject to recovery, if challenged.
However, the UK’s new regime is (for the most part) no longer under the jurisdiction of the EU and its courts – instead, a new UK independent authority will be established to supervise the granting of subsidies. It had been proposed that the Competition and Markets Authority (CMA) should become the new regulator but this is not definite. The Government issued a consultation on the approach the new regime should take at the beginning of February 2021 with a 31 March 2021 deadline.
Many of the types of state aid permissible under EU state aid law – including de minimis aid, aid which is for services of general economic interest, and aid relating to a national or global economic emergency (such as in relation to the Covid-19 pandemic permitted under EU state aid law by way of the Temporary Framework) – are also broadly permissible under the new UK regime. However, some legal requirements of the permitted aid, including financial thresholds, now differ. Recipients of subsidies such as charities, not-for-profits and social enterprises should therefore generally continue to be eligible for state funding for which they were previously eligible, but will need to keep abreast of the relevant legal exemptions to ensure their compliance.
It is worth noting that, with a blanket exemption for aid relating to a national or global economic emergency, it is possible that UK organisations will now be able to benefit from greater amounts of aid from the UK’s Covid-19 related packages than was possible under the EU Temporary Framework, subject to broader compliance with the regime. Again this needs to be confirmed by Government
Further, as a result of the Northern Ireland Protocol, the EU’s state aid regime will continue to apply in full where it is possible that a subsidy might affect trade between Northern Ireland and the EU. In addition, any subsidy relevant to Northern Ireland might be subject to both the EU’s state aid regime and the UK’s new subsidy control regime. Organisations with any connection to Northern Ireland should bear this in mind.
Although the UK has now finally agreed with the EU a new UK subsidy control regime to help ensure continued fair trade and cooperation, the practical details of the new regime are as yet undetermined. In particular, relevant Government funding is being administered in the absence of the necessary guidance and bespoke legislation. We will keep you updated as the regime hopefully takes form over the year.
This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.
All content on this page is correct as of March 3, 2021.