Public Law

The European Commission has introduced new guidelines for Member States on how to give investment aid to companies to support the economic development of disadvantaged regions between 2014 and 2020. These will replace the current regional aid guidelines, which will expire at the end of June 2014.

The new guidelines will come into force on 1 July 2014. They contain rules allowing Member States to draw up regional aid maps to identify the geographical areas in which companies can receive investment and at what level. Some of the key features of the new guidelines are:

  • a widening of circumstances that are exempt from the obligation of prior notification to the Commission will allow Member States to spend smaller aid amounts without this administrative burden;
  • large aid measures will of course still be subject to Commission scrutiny and will undergo an in-depth assessment of their incentive effect, proportionality, contribution to regional development and effects on competition. Only such aid as is necessary for regional development investments that would not have taken place without the aid will be permitted;
  • aid to large companies in more developed assisted areas will only be allowed for investments that bring new economic activity, for initial investments for the diversification of existing establishments into new products, or for new process innovation, because it is more likely that these investments are carried out thanks to the subsidy.

More details of the specific features of the guidelines are available in a recent press release by the Commission.

The new guidelines will lead to an increase in the overall share of regions where regional aid can be granted, from the current level of 46.1% of the EU population to 47.2%. The population coverage tends to favour rural communities, where business investment and employment opportunities are usually low. However, the focus will be on regions that are less developed from an EU perspective (namely areas with a gross domestic product below 75% of the EU average). This means that some remote areas in Scotland with a high GDP and low unemployment, such as Shetland, will not automatically be entitled to investment aid, despite the geographic challenges faced by businesses in remote island communities. The extension of qualifying areas will of course increase opportunities across other parts of Scotland.

Government, Regulation and Competition Law
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