ARTICLE
23 January 2025

Growth Mission Is Possible? Reflections On Subsidy Control And Competition Law

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Square One

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Last week, the UK Government published a Green Paper titled "Invest 2035: The UK's Modern Industrial Strategy" which sets out its approach and asks for views and evidence to help develop its new Industrial Strategy which is set to be launched in Spring 2025.
United Kingdom Antitrust/Competition Law

Last week, the UK Government published a Green Paper titled "Invest 2035: The UK's Modern Industrial Strategy" which sets out its approach and asks for views and evidence to help develop its new Industrial Strategy which is set to be launched in Spring 2025.

The key mission of this Industrial Strategy: the "Growth Mission". Net zero, regional growth, and economic security and resilience are further areas that the UK Government is seeking to support.

Eight growth-driving sectors have been identified:

  • Advanced Manufacturing
  • Clean Energy Industries
  • Creative Industries
  • Defence
  • Digital and Technologies
  • Financial Services
  • Life Sciences
  • Professional and Business Services

The plan is to identify sub-sectors within these eight sectors that meet the Industrial Strategy objectives and where there is evidence that policy can address barriers to growth. The Green Paper states that the intention is to implement sector-specific and cross-cutting policy levers that support businesses to overcome barriers and invest. A 'place-based' approach is also being taken meaning that the Industrial Strategy will focus efforts on places with greatest potential for these growth sectors, focusing on city regions, high potential clusters and strategic industrial sites. Local Growth Plans and devolution of powers to Mayoral Combined Authorities across England are being proposed.

With a stated 'pro-business' approach being taken to achieve long-term stability, a renewed commitment to free and fair trade, and reducing barriers to investment in the UK, it follows that meaningful consideration of competition policy, including subsidy control, should come into play in this Industrial Strategy, being two of the key levers available. The Green Paper makes a nod to this – perhaps, more accurately a subtle glance – by asking some general questions but without really stating firm ideas or actions that could be taken when it comes to pulling and activating competition policy levers. A positive – for every question, there is at least the possibility of finding an answer! No?

If, as an example, we look at subsidy control and the fact that we now have a new post-Brexit domestic subsidy control regime in the form of the Subsidy Control Act 2022, we might argue that we have some new tools at our disposal to pro-actively support the identified growth-driving sectors, particularly when it comes to the 'place-based' approach to growth which presumably is key to delivering on the regional growth objective of the Industrial Strategy. I'm talking here about the Streamlined Subsidy Schemes (known as "Streamlined Routes").

These are voluntary mechanisms that can be used by UK public authorities to give certain subsidies – when a subsidy is given under a Streamlined Route there is no requirement to make an assessment against the subsidy control principles as it has already been pre-assessed by the UK Government as compliant with the subsidy control regime. Provided that the eligibility criteria are met, and the relatively simple procedural steps are followed, where subsidy support is needed and used appropriately to deliver on identified key public policy objectives, Streamlined Routes represent a tangible tool for delivering quick subsidy support; perhaps an at pace intervention for a productivity and growth challenge that requires an at pace solution and result?

To-date 3 Streamlined Routes have been made, and these create pathways for awarding swift subsidies of lower value in following categories:

  • Research, Development and Innovation
  • Energy Usage
  • Local Growth

In broad terms, the Research, Development and Innovation Route permits subsidies for feasibility studies, and industrial research and experimental development projects, at varying intervention rates, up to a maximum amount of £3 million, and for certain other forms of SME RDI support up to 50% of eligible costs, up to a maximum amount of £500,000. The Energy Usage exemption allows awards of up to £3 million for energy demand reduction projects, up to £15 million for Green Heat Networks, and up to £1 million for related Green Skills Training. The Local Growth Streamlined Route permits grants of up to £400,000 to SMEs for business development projects, with an intervention rate of 95% of eligible costs for start-ups, 25% for small enterprises and 15% for medium enterprises.

So, we have existing options (in the form of the three Routes above) as well as the potential for new Streamlined Routes to be made under section 10(4) of the Subsidy Control Act 2022 – and it seems that in circumstances where UK Government is consulting on how best to deliver a new Industrial Strategy and identifying what policy levers are needed that there is a real opportunity here to consider how the Streamlined Routes mechanism might be used to support the stated aims. A key benefit of the Streamlined Routes is that they may be viewed by all parties concerned as providing a comforting level of certainty when giving subsidies. Indeed, the Statutory Guidance for UK Subsidy Control Regime specifically states that this is one of the key purposes of the Streamlined Routes:

"Streamlined routes offer public authorities a way to award subsidies more quickly. They are intended to promote confidence and legal certainty among public authorities and enterprises undertaking projects that are routine, at lower risk of creating competition distortions, or aligned to priorities of the UK and devolved administrations."

There is therefore an alignment with the objective of pursuing the "certainty and stability businesses need to invest in the high growth sectors that will drive our growth mission" which is iterated in many forms in the Green Paper. While UK Government will need to decide on the balance of private and public sector investment that it will in fact strike in the pursuit of its new Industrial Strategy – and the sentiment of the Green Paper indicates that there is a drive to unlock private investment and pursue partnerships with the private sector, rather than take a subsidy-led approach – competition policy, including subsidy control, could helpfully be harnessed here.

While we're at this Green Paper phase of this Industrial Strategy it means that we are necessarily at an 'ideas' phase of the process (the UK Government will be consulting on a draft of the next Strategic Steer to the Competition and Markets Authority from the Business and Trade Secretary to seek stakeholders' views on competition regulation priorities), rather than being in a position to understand any firm proposals when it comes to competition law, and specifically subsidy control. The consultation closes at 11.59pm on 24 November 2024, so I guess we need to watch this space...

Originally published October 28, 2024

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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