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Will the New Subsidy Control Rules Give Better Support to Businesses?

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The UK Government has recently published its proposed new post-Brexit subsidy control rules, setting out how public authorities across the country can deliver financial support to businesses.

The Subsidy Control Bill details the proposed new system of subsidy control to be implemented in the UK in 2022.

Please click below to hear Bethan Lloyd ,Partner at Geldards LLP, explain more:

The UK Government has promised that the new system will allow quicker and more flexible support to businesses and that it will create a consistent, level playing field for subsidies across the UK.

However, the Welsh Government has already sounded a note of warning about the bill, expressing concern it was not properly involved in the process and saying the rules should not constrain the devolved powers of Welsh Ministers or “act as a tool to reverse devolution through the back door”.

Those concerns aside, initial impressions of the bill are largely positive.

It promises to bring a degree of precision and clarity that we do not have in the state aid rules and which has certainly been absent from the temporary rules we have been following since the beginning of the year.

For a start, the new rules are clearly written and easier to understand than the previous rules.

There are also some interesting new features which, on a first read, promise to achieve a system which is relatively easy to navigate and which will not involve lengthy delays.

As well as covering subsidies that might affect trade or investment between the UK and other countries, the rules also cover subsidies that might have an effect on competition or investment within the UK, thus seeking to preserve a level playing field between the four nations.

This is an increasingly important issue in this age of devolved governments and the growing prevalence of generously funded city and region deals.

There is also an outright ban on awarding subsidies that will result in the relocation of jobs and economic activities from one area of the UK to another, a practice known as displacement.

This is welcome since it will avoid the risk of devolved nations and regions engaging in ‘subsidy races’ to attract businesses to relocate from elsewhere in the UK.

The new rules will be regulated and enforced by the Subsidy Advice Unit, a new division within the Competition and Markets Authority (CMA).

This unit will play a big role in the new regime, both in relation to reporting on subsidies and subsidy schemes following a mandatory or voluntary referral, or referral by the Secretary of State, and in relation to dealing with any challenges.

It is hoped that the guidance to accompany the new rules will provide support for interpreting the seven subsidy principles in a way which will allow appropriate support to be provided where it is needed most, such as for the least affluent areas in Wales and SMEs.

Putting aside the political issue of how well the new rules will respect devolution and create a fair system for all four regions of the United Kingdom, the bill appears to be a positive step towards a more responsive and more common-sense subsidy system.

Bethan Lloyd is a Partner at Geldards LLP, a leading UK law firm based in Cardiff, the Midlands and London. She specialises in subsidy control, state aid, public procurement, public law and competition law.