New UK Laws to Sweep Away EU State Aid Rules

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Things have started to move. Now there is new legislation designed to replace EU rules and give government and councils greater freedom to support businesses, the business secretary said.

The Subsidy Control Bill will replace state aid rules across the EU, which require member states to seek government approval for assistance to businesses.

According to ministers, these new rules will allow the government to help businesses with grants or loans more quickly, which is fantastic.

It has been dubbed "the most important part of the post-Brexit legislation so far."

Business Secretary Kwasi Kwarteng also commented that the government was using its "new freedoms" after Brexit to "empower public authorities across the UK to provide financial support - without facing some heavy bureaucracy."

"We are seizing the opportunities of being an independent trading nation to support new and emerging British industries, create more jobs and make the UK the best possible place to start and grow a business," it added.

The government further stated that the new bill would allow it to be more responsive, targeted, and timely in its interventions with businesses.

The government also said that the announcement would not "signal a return to the failed approach of the 1970s of picking winners or bailing out unsustainable companies."

If you stop to look, the UK has historically granted far less government support to private companies than its EU counterparts in France and Germany. Officials have traditionally said they do not expect the overall level of government aid to increase significantly.

The government has said it will judge cases on whether they offer value for money and help achieve goals such as "leveling up" and decarbonizing the economy.

There will also be safeguards to ensure that delegated government departments and local authorities do not get involved in support bidding wars that could cause a relocation of businesses and jobs from one part of the UK to another.

Matthew Fell, UK policy director for the Confederation of British Industry, said a new "fast-track" system could be a "useful tool to meet the government's ambitions for the economy."

He said EU state aid rules are "often prohibitive and bureaucratic."

"Government support is the last resort for business, but at the right time and in the right place, it can make an invaluable contribution to key players and sectors," he added.

"Smart decision making that ensures value for the public purse respects the level playing field agreement with the EU and supports economic growth in all parts of the UK can only be a good thing."

'Less certainty'

However, the bill's text is to be closely studied by the European Commission, which has expressed concern that the UK could distort competition by failing to ensure that UK and EU companies operate on a level playing field. Competition lawyers have also warned that the new rules could be controversial.

Martin McElwee, the competition lawyer at Freshfields, said the government's new legislation offers "more flexibility" but "less certainty." He noted that companies and lenders would not find this loss of certainty easy.

"The EU subsidy regime was very complex, but we could help businesses, charities, and public service providers understand which side of the line they fell on," he added.

"If you are a bank thinking of lending to a company that has received government support, isn't certain what you need?"

A new unit to give advice on the operation of the new regime will be set up within the existing Competition and Markets Authority - but the CMA will not have the power to ban support.

The UK will still be subject to World Trade Organization rules, and any decisions made can be challenged in the courts.

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