UK to ditch EU state aid rules in favour of more ‘flexible’ approach

The UK is expected to do away with legislation limiting Government support to businesses, thanks to a new bill meant to “empower public authorities across the UK to deliver financial support”.

UK Business Secretary Kwasi Kwarteng said that the Subsidy Control Bill will allow the central Government and local councils to more quickly help companies with grants or loans.

Dubbing the bill “the most important bit of post-Brexit legislation yet”, Mr Kwarteng argued that the UK is using its “newfound freedoms” to remove the “burdensome red tape” surrounding assistance to business.

“We’re seizing the opportunities of being an independent trading nation to back new and emerging British industries, create more jobs and make the UK the best possible place to start and grow a business,” he said.

Under EU law, Members States must seek approval from the European Commission before granting aid.

The normally stringent conditions for Government support were loosened during the COVID-19 pandemic, with national airlines among the sectors benefitting from the change.

A request by the Maltese Government to support Air Malta, which has long been struggling to become self-sustainable, is currently before the Commission. This is the third such recovery plan in the last 11 years.

The UK Government meanwhile sought to reassure stakeholders that the new rules do not “signal a return to the failed 1970s approach of government picking winners or bailing out unsustainable companies”.

It insisted that the new bill would allow it to be more agile, targeted and timely in its interventions with businesses.

On the other hand, officials have said they do not expect the overall level of state aid to increase significantly.

The Government also clarified that cases for support would be judged on “whether they deliver good value for money and help hit targets such as ‘levelling up’ and decarbonising the economy.”

Additionally, safeguards are being included to ensure that devolved government departments and local authorities do not engage in bidding wars of support that could cause a relocation of businesses and jobs from one part of the UK to another.