The Department for Business, Energy and Industrial Strategy has announced [1] that the operative provisions of the new UK subsidy control regime will come into full effect on 4 January 2023. The regime is set out in the Subsidy Control Act 2022 (the Act) [2] and creates a legal framework that builds on the UK's international commitments on subsidy control. It should provide more certainty for public authorities who, since 31 December 2020, have had to consider any proposed financial support solely against the UK’s various international commitments on subsidy control (in particular the EU/UK Trade and Co-operation Agreement) using interim guidance provided by the Government.

The Government has consulted on statutory guidance [3] for the Act which explains the provisions and is intended to help public authorities design and award compliant subsidies. We expect this to be finalised and published shortly.

The starting point of the UK subsidy control regime is that subsidies are permitted if they comply with certain subsidy control principles without any need to obtain formal approval before granting the subsidy. The Act includes a new additional principle to those in the Government’s interim guidance which requires public authorities to demonstrate how the measure at issue has been 'designed to achieve their specific policy objective while minimising any negative effects on competition or investment within the United Kingdom'. 

Whilst we understand that this is intended to ensure that a measure does not unduly favour one firm to the detriment of a competitor or new entrants to the UK market, or unduly reduce competition within the UK, we provided written evidence [4] to the Subsidy Control Bill select committee highlighting the increased administrative burden on public authorities that would result from the introduction of this domestic test. The principle remains in the Act, however, and draft statutory guidance sets out a four-part framework to help public authorities ensure that a subsidy is consistent with this and the other principles in the Act. 

The Government plans to introduce a few streamlined subsidy schemes which any public authority can use to give a subsidy without needing to carry out an assessment against the subsidy control principles providing the conditions of the scheme are adhered to. There will be some subsidies that will need to be referred to the Competition and Market Authority’s Subsidy Advice Unit prior to being implemented, however, so-called 'Subsidies and Schemes of Particular Interest'. The Government’s draft Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022 [5] defines awards of £10 million and over in a three-year period as being within the scope of these as well as awards of £5 million for higher risk sectors. 

Our subsidy control team is working with several clients (both public authorities and recipients of support) to help them get to grips with the various aspects of the new regime and support analysis of any proposed financial assistance. Please get in touch if we can help at all.
  

[1] Subsidy control regime

[2] Subsidy Control Act 2022

[3] Statutory guidance on the Subsidy Control Act 2022

[4] Subsidy Control Bill written evidence

[5] Subsidies and Schemes of Interest and of Particular Interest