It's official: the Subsidy Control Act 2022, the UK's long-term replacement for the EU State aid regime, will come into force from 4 January 2023.

This follows the publication by the UK Government of its response to its recent consultation on subsidies of interest and subsidies of particular interest.

Under the Act (which we have previously written about here and here) the UK Government may make regulations specifying subsidies and subsidy schemes which are either "of interest" (and which therefore may be referred to the State Aid Unit before they are made) or "of particular interest" (which must be referred). The Government's draft regulations have now been laid before Parliament and published in their final form, to come into force at the same time as the Act itself.

Following consultation the Government decided largely to maintain the position as set out in the previous draft regulations. The main exceptions to that are:

  • There are changes to the provisions on cumulation.

As initially drafted, a second subsidy granted by any public authority towards substantially the same project as a first subsidy, would have to be cumulated with the value of the first subsidy – if (taking the subsidies together) the total was above the "interest" or "particular interest" thresholds, the second subsidy would be notifiable even if it would not have been on its own.

    The finalised regulations apply an additional threshold in relation to subsidies of particular interest, so that an additional subsidy will only be of interest or particular interest if it both (a) takes the cumulative total subsidy over the relevant threshold and (b) itself exceeds a threshold of £1m.

    • The final regulations also now include special rules for subsidies that are explicitly conditional on relocation (i.e. economic activity moving from one part of the UK to another). These will now all be at least subsidies of interest, and those with a value in excess of £1m will be subsidies of particular interest.

    Statutory guidance has also just been published on the regime as a whole, and this now includes further detail on which subsidies and schemes the Government wishes to encourage granting bodies to notify in advance, which has been added since the guidance was in draft form. Separate draft guidance has been published on how the Competition and Markets Authority's Subsidy Advice Unit will be required to exercise its enforcement functions under the Act.

    In addition to the statutory guidance the Government has also published a subsidy assessment template to assist public bodies in applying the subsidy control principles. 

    The Government has also indicated that it will shortly publish its "streamlined routes" (pre-cleared subsidies which effectively replace the old General Block Exemption Regulation regime), which will cover subsidies for R&D, green energy developments and "levelling up" programmes such as clearing brownfield sites and revitalising city centres. Those are expected to be published before the end of the year, but illustrative examples have been published including for an R&D streamlined route. The Scottish Government and other devolved administrations also have statutory powers to make their own streamlined routes that are open to public authorities in their jurisdictions.

    Pending the Act coming into force, the relevant law remains the UK-EU Trade and Cooperation Agreement and authorities granting subsidies must consider their compliance with the subsidy control principles set out in that Agreement. Subsidies and schemes made now will be preserved after the Act comes into effect under legacy provisions in the Act.

    If you would like to discuss how the Act affects your organisation, please contact Jamie Dunne, Charles Livingstone, or your usual Brodies contact.

    Contributors

    Jamie Dunne

    Senior Associate