Subsidy control in the United Kingdom from 1 January 2021

14th January 2021

With the expiry of the Brexit transitional period on 31 December 2020, the EU state aid rules have (with limited exceptions, chiefly related to Northern Ireland) ceased to apply in the United Kingdom. They have been replaced by the subsidy control provisions of the UK/EU Trade and Cooperation Agreement concluded on Christmas Eve.

Mathew O'Reagan

Whilst the new rules are largely based on familiar principles applied in EU State aid rules and may provide greater flexibility for public authorities to provide subsidies to businesses, particularly small and medium-sized enterprises and third sector organisations providing services to their local communities, there remains considerable uncertainty as to how the rules will be applied, including by national courts. In particular, despite the TCA obliging the UK to create an independent subsidy-control authority and to introduce new legal remedies in national law when a subsidy is found to be unlawful, the UK Government has not yet done so. Although it has published guidance, it has not yet made proposals for a system of ‘block exemptions’ for obviously non-problematic aid.

In this new note, specialist competition law barrister Matthew O’Regan explains the new subsidy control rules that will apply when subsidies (including grants, soft loans, loan guarantees and foregoing revenue due, including tax revenue) are provided and identifies a number of areas of uncertainty for public authorities, beneficiaries of subsidies and their competitors. In view of this uncertainty, it will be necessary for all parties to consider, and take advice on, whether a subsidy is permitted under the TCA and other international trade agreements.

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