Following Brexit and the end of the transition period the UK has now committed to a new subsidy control regime in accordance with the new EU-UK Trade and Cooperation Agreement, to replace the EU state aid regime.

All organisations which might give or receive subsidies from UK Government funds – including central and local government, charities, not-for-profits and social enterprises – should be aware of the new subsidy control regime and what it means for them.

We set out a summary here of what we know for now – but, many practical details of the new regime are as yet undetermined.

We will keep you updated as the regime hopefully takes form over the coming months. In the meantime, please reach out to Lindsay Draffan and Suhan Rajkumar should you have any queries.

Who do these changes affect?

State aid/subsidy control is relevant to all organisations which might give or receive subsidies from UK Government funds – including central and local government, charities, not-for-profits and social enterprises. Subsidies under the new UK regime can include for example guarantees and tax benefits, as well as direct grants (in line with the definition of state aid under the EU regime).

What do I need to know about the new subsidy control regime?

The key elements of the new UK regime will, for now, take a very similar shape to EU state aid law:

  • Organisations granting or receiving UK Government derived subsidies will  still need to carry out a legal assessment of proposed subsidies, and may be asked to sign subsidy control declarations.
  • Organisations will be subject to similar transparency provisions, enabling interested parties to have visibility over possible unlawful subsidies. In the event of non-compliance, subsidies may be subject to recovery, if challenged.
  • As before, many types of subsidy will be permitted without any specific prior approval (see below).
  • 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.

Does this mean that my organisation’s Government grants and subsidies will be treated differently?

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 panic 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 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.

Thanks to the blanket exemption for aid relating to a national or global economic emergency, it is possible that UK organisations may now be able to benefit from greater amounts of aid from the UK’s Covid-19 related packages (some of which were previously subject to the EU’s EUR 800,000 cap under the Temporary Framework).

Who will enforce the new regime?

The UK’s new regime is (for the most part) no longer subject to the EU and its courts. Instead, a new UK independent authority will be established to supervise the granting of subsidies.

As yet, there is no clear indication of what form or shape the new UK regulator may take. However, the Government has issued helpful guidance on the new regime for public authorities.

Lindsay Draffan and Suhan Rajkumar are experts in advising both grant givers and receivers on the complexities of the EU State aid regime. They are following closely the development of the UK Subsidy Control regime and are ready to help you navigate this new legal framework.