Are you ready for the new UK Subsidy Control Regime?

The Legislative Framework

The new regime replaces the EU State aid regime and is set out in the Subsidy Control Act 2022 (Act) together with the following Regulations:

The Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022 – which sets out when a subsidy will be considered a Subsidy or Scheme of Interest (SSoI) or a Subsidy or Scheme of Particular Interest (SSoPI);

The Subsidy Control (Gross Cash Amount and Gross Cash Equivalent) Regulations 2022 - which sets out how a public authority must determine the gross cash amount or the gross cash equivalent of a subsidy;

The Subsidy Control (Subsidy Database Information Requirements) Regulations 2022 – which sets out what information needs to be uploaded to the subsidy database in respect of a subsidy; and

The Subsidy Control (Information-Gathering Powers) (Modification) Regulations 2022.

The Act and Regulations are accompanied by over 200 pages of Statutory Guidance. Public authorities must have regard to this guidance when given a subsidy or making a subsidy scheme.

The new regime has been designed to comply with the UK’s obligations under the EU-UK Trade and Cooperation Agreement (TCA) along with the UK’s other international commitments. However, the new regime does not apply to:

subsidies or subsidy schemes which are subject to Article 10 of the Northern Ireland Protocol; and

subsidies or subsidy schemes which have emanated from European Structural Funds (such as the European Regional Development Fund).

Key Features: An overview

Key features of the new regime include:

a new definition of “subsidy” and the concept of a “subsidy scheme”;

exemptions, including Minimum Financial Assistance, services of public economic interest, and emergencies;

prohibited subsidies, including unlimited guarantees, subsidies contingent on export performance or the use of domestically produced goods or services;

three different routes for assessing subsidies, being the Streamlined Route, Special Interest Routes and the Default Route;

the introduction of seven principles which public authorities must comply with when giving a subsidy or making a scheme (and additional principles for subsidies relating to energy and the environment);

the creation of a new Subsidy Advice Unit which will independently evaluate subsidy assessments;

the creation of a national subsidy database and the need to publish information on subsidies once awarded for transparency purposes; and

the ability for the Competition Appeal Tribunal to review the lawfulness of any subsidy.

Isn’t this State aid under a new name?

The new regime was intended by the UK Government to be more flexible, less complex and less constrained than the EU State aid regime. There are certain parts to the regime where this could be seen to be the case, however, the new regime also has many similar features to the EU State aid regime. This is, to a certain extent, due to the deal that was arrived at with the EU post Brexit.

But there are other elements to the new regime which were not prescribed by the TCA and which feel like State aid under a new guise. For example, the new “Streamlined Routes” (the drafts of which were published on 13 December 2022), look very like certain exemptions found in the General Block Exemption Regulation (GBER) – right down to prescribing specific aid intensities.

If the 200 page guidance document is anything to go by, the new regime looks to be anything but simple to apply. As the regime becomes embedded after 4 January 2023, it will be interesting to see how the new regime is perceived and applied. In the meantime, all public authorities should familiarise themselves with the legislation and guidance and amend their processes and procedures to align with the requirements of the new regime.

If you have any further or specific queries in relation to the Subsidy Control regime, please do get in touch with our public sector team.