There is a new consultation on the UK subsidy control regime for businesses to have their say.
On 26 November 2024 the UK Department for Business and Trade ('DBT') published details of a new consultation which is now live on the UK subsidy control regime: "Refining the UK subsidy control regime".
This latest consultation focuses on refining 2 key areas:
- Changing the thresholds for the referral of subsidies to the Competition and Markets Authority ('CMA').
- Creating new streamlined routes for public authorities to use to deliver subsidies more quickly and easily in specific circumstances.
Referral thresholds – unintended consequences
The consultation paper highlights potential unintended consequences with current referral thresholds. It states that since the Subsidy Control Act 2022 (the 'Act') came into force on 4 January 2023 "a greater number of subsidies or subsidy schemes have been referred to the CMA under the mandatory referral threshold ([subsidies or schemes of particular interest]) than was anticipated, however no subsidies of interest have been voluntarily referred." The paper goes on to query whether high inflation in recent years, and consequent increased project costs, has contributed to the mandatory referral threshold capturing more subsidies and schemes than had been intended.
Currently, subsidies above £10 million are subject to mandatory referral to the CMA (or above £5 million for subsidies to sensitive sectors), and the threshold for voluntary referral is between £5 million and £10 million. DBT is seeking views on whether these thresholds are appropriate, with a focus on ensuring that that the regime is working effectively.
Time for new streamlined routes
The Act allows ministers to create streamlined routes for subsidies. A streamlined route is essentially a subsidy scheme which has been pre-assessed by DBT as compatible with the UK subsidy control regime, and therefore not subject to review by the CMA. There is no need to assess subsidies given under a streamlined route against the subsidy control principles, providing they comply with conditions set out in the specific route – importantly, they are voluntary mechanisms.
To-date 3 streamlined routes have been made, and these create pathways for awarding swift subsidies of lower value in the 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.
The consultation asks the question of whether two specific additional streamlined routes would be helpful in practice (and the useful scope of such): one for community regeneration and another for arts and culture. There is also an open question on whether there are any other types of subsidies with a low risk of distortion that would be more effectively made using a streamlined route.
A rather broad – but welcome – catch all question is included asking whether there are "any other suggestions for how the subsidy control regime could be improved". There is therefore an opportunity for ideas to be proposed and so it will be helpful for businesses and advisors to ponder on the challenges they face in the practical application of the UK subsidy control regime at present. However, such ponderings must be formulated relatively quickly as the deadline for responses to the consultation is 21 January 2025.
You can find more details and complete the survey here to have your say.
Originally published December 4, 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.
