Consultation Response: Refining The UK Subsidy Control Regime

Overview

The Subsidy Control Act 2022 ("the Act") came into force on 4 January 2023, establishing the UK's enduring subsidy control regime following its exit from the EU and replacing EU State aid rules. The subsidy control regime is primarily designed to help public authorities make subsidy awards in a manner which ensures minimum impact on both competition and investment, while also providing for the efficient use of public monies.

Unlike the mandatory pre-notification and approval requirements of the EU State aid rules, a key change under the Act relates to procedure, with the UK regime imposing self-assessment requirements on 'subsidy-giving' public authorities. The Act obliges public authorities to ensure their own compliance with the wider subsidy control regime.

Government consultation

In November 2024, the Department for Business and Trade (DBT) issued a consultation on refinements to the UK subsidy control regime, which focused primarily on proposals relating to:

1. thresholds for the referral of subsidies to the Competition and Markets Authority (CMA); and
2. streamlined routes for public authorities to deliver subsidies more speedily.

On 7 April 2025, the DBT published the government's response to the consultation, setting out its decisions on the specific proposals to be taken forward.

Notably, the government have set out an intention to:

1. increase the mandatory referral threshold for Subsidies or Schemes of Particular Interest (SSoPI) (in non-sensitive sectors) from £10 million to £25 million; and
2. create two new streamlined subsidy schemes for: (a) Arts and Culture; and (b) Community Regeneration.

Thresholds for the mandatory referrals to the CMA

The law

The Act provides for two distinct categories of subsidy:

1. Subsidies or Schemes of Interest (SSoI), which potentially pose a risk of negative effects on domestic competition or investment; and
2. SSoPI, which can be assumed to potentially lead to substantial negative effects on domestic competition or investment, or on international trade and investment.

Thresholds are laid out by The Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022, also known as the SSoI and SSoPI Regulations.

SSoIs are subject to voluntary referral to the CMA, while SSoPIs are subject to mandatory referral to the CMA.

• Subsidies valued at over £10 million (or over £1 million but cumulating to £10 million over three previous financial years) = SSoPI.
  • SSoPIs must be referred to the CMA, where they will then be evaluated by the Subsidy Advice Unit (the SAU).
• A subsidy scheme = a SSoPI where it allows for one or more subsidies of particular interest to be awarded under it.
• Subsidies valued between £5 million and £10 million (outwith sensitive sectors) may be voluntarily referred to the CMA for review.
• For sensitive sectors, subsidies will be SSoPI if they are valued over £5 million – these are subject to mandatory referral.

Key changes

After consideration of the consultation responses received with respect to subsidy referral thresholds, the government intends to do the following:

1. Increase the mandatory referral threshold for SSoPIs (in non-sensitive sectors) from £10 million to £25 million. Revised regulations will be laid before Parliament later in 2025. This change is hoped to free up the CMA's capacity to place increased focus on referrals of larger, higher impact subsidies, with more potential for causing greater harm. Many of the respondents who supported a threshold change for SSoPIs reasoned that an increase will help to account for inflation and rising costs, as well as reduce the burden related to administration and resourcing costs with regard to delivering smaller subsidy awards.
2. Maintain the threshold for mandatory referral in sensitive sectors at £5 million. Despite a majority response (of 16 respondents) suggesting a heightened sensitive sector referral threshold; with suggestions ranging from £7 million all the way to £50 million, the government has decided to maintain the existing threshold at £5 million. Supporting evidence with regard to altering the list of sensitive sectors was also noted to be minimal and the government (as well as a majority 13 respondents) has deemed it important to retain a high-level of scrutiny in this area. The DBT will periodically review the sensitive sector list in order to ensure that those sectors where subsidies pose the greatest risk of distorting trade and competition, are included, or incorporated.
3. Maintain the voluntary referral threshold for SSoIs. This will ensure that public authorities may still refer subsidies with a value of less than £25 million to the CMA. The DBT noted that allowing authorities to keep receiving instructive feedback from the CMA (when needed) was an important factor.
4. Maintain SSoPI monetary thresholds concerning relocation subsidies and the cumulation of related subsidies.

Streamlined routes

What are streamlined routes?

Streamlined routes (also known as streamlined subsidy schemes under section 10 of the Act) are a form of subsidy scheme created by the UK Government for use by public authorities.

They are a voluntary tool that authorities may use in order to award subsidies without the requirement to assess them against the subsidy control principles.

Streamlined routes are pre-assessed by the DBT to be compliant with the wider subsidy control regime. There is no requirement to notify the SAU where a proposed grant is consistent with the terms of any route (or scheme).

As outlined in the consultation, these routes are designed to "promote confidence and [give] greater legal certainty to public authorities and businesses [which undertake] projects that are high-frequency and low risk" and importantly, "which are aligned to the government's priorities".

Existing streamlined routes

Currently, three streamlined routes have been in effect and available for use since 9 January 2023. These cover:

1. research, development and innovation (RDI);
2. energy usage; and
3. local growth.

A large portion of respondents to the consultation were supportive of the creation of further streamlined routes, with the general view that they are largely effective policy instruments.

However, 20 respondents described the process of using streamlined routes as "bureaucratic and restrictive".

Key changes

Due to a large majority of positive responses to their proposals, the DBT has decided to move forward with the creation of two brand new routes. These new routes will focus on:

1. arts and culture; and
2. community regeneration.

The DBT will continue to monitor demand for new routes, including those suggested by respondents in this consultation. These included suggestions for routes focusing on:

1. skills and training;
2. business/SME support;
3. manufacturing;
4. brownfield land development and housing;
5. infrastructure and development;
6. public transport;
7. community leisure;
8. social issues; and
9. support for voluntary and third sectors.

Subsidy Control (Subsidy Database Information Requirements) Regulations 2022

In addition to the mandatory referral threshold changes and the introduction of two new streamlined routes, the DBT have opted to amend the Subsidy Control (Subsidy Database Information Requirements) Regulations 2022.

This is with the aim of "[remedying] the current undesirable situation where in-scheme award uploads are required to duplicate information already provided at the scheme-level".

The DBT will further review if additional changes are necessary in order to provide for the seamless operation of the wider regime.

Conclusion

The DBT has confirmed that it will take into consideration all comments provided by respondents to the consultation, and factor these into their 'ongoing policy development' as well as future iterations of the statutory guidance to the Act. The most recent version was published on 21 January 2025.

Suggestions made by respondents as to improving the 'functionality', and 'searchability' of the transparency requirements and subsidy database, respectively, will also be taken into account, as the government looks to make gradual improvements to the transparency database over time.

Finally, the consultation acts as a reminder that the CMA possesses a statutory duty and function under section 65 of the Act to monitor and report on the Act, with regard to the effectiveness of its operation. This duty concerns measuring the Act's overall impact on competition and investment within the UK.

The SAU of the CMA will "prepare a report on the outcome of their review, initially three years and then six years after the commencement of the Act. Thereafter, the CMA will publish reports at five-yearly intervals".

On 15 April 2025, the SAU published a call for inputs, inviting views and evidence from all stakeholders that have previously engaged with the subsidy control regime. This, alongside further data-gathering, will look to determine the following points:

1. whether the Act is functioning as intended;
   1. whether the Act has had an impact on competition and investment in the UK; and
   2. whether the arrangements in place to support the Act's delivery are sufficient and impactful.

The SAU's call for inputs will close to stakeholders on 24 June 2025. Further information on how to respond and provide evidence can be found on CMA Connect.

The CMA's first monitoring report on the Act can be expected for release in summer 2026.

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.