State Aid Rules in a No Deal Post Brexit World

In the fourth of our ‘No Deal Guidance Posts’ we look at how the state aid rules will apply in the United Kingdom in the unlikely event that the UK leaves the EU in March 2019 with no agreement in place and what this may mean for UK businesses operating in a post Brexit world.

What is State Aid and who currently qualifies?

State aid is support in any form (financial or in kind) from any level of government – central, regional or local – which gives a business or another entity a benefit in the single market that could not be obtained during the normal course of business.

State aid is governed by a legal framework. These rules are set out in the Treaty of the Functioning of the European Union and associated European legislation. The rules are in place to ensure open and fair competition and to prevent subsidies causing unfair distortions within the single market.

As long as the UK is part of the EU, state aid rules have direct effect without the need for domestic implementing legislation. The rules are enforced by the European Commission. There is no specific UK legislation related to state aid regulation. It is, however, possible to bring a claim in the UK courts to force aid givers who have not notified aid (to the European Commission) to stop giving aid until they have done so.

What is the likely impact following a no deal outcome?

The government are committed to creating a UK-wide subsidy control framework to ensure the continuing control of anti-competitive subsidies.

The EU state aid rules will be transposed into UK domestic legislation under the European Union (Withdrawal) Act. This will apply to all sectors; and will mirror existing block exemptions as allowed under the current rules, including the Agricultural Block Exemption Regulation, and the Fisheries Block Exemption Regulation.

The Competition and Markets Authority, which is a world leading competition authority, will take on the role of enforcement and supervision for the whole of the UK.

The UK government will continue to work with the devolved administrations to ensure the new state aid regime works for the whole of the UK.

What are the implications?

If the UK were to leave the EU on 29 March 2019 with no agreement, the Competition and Markets Authority will take over state aid regulation within the UK at that point. The new regime will apply to all businesses with operations in the UK – whether UK, EU or third country based.

What does this mean for businesses and other stakeholders?

UK businesses and EU businesses with operations in the UK will still be able to receive state aid from UK public authorities in accordance with the UK state aid rules.

Any complaints from businesses about unlawful aid or the misuse of aid should be made to the Competition and Markets Authority.

Businesses should also consult further guidance to be published by the Competition and Markets Authority in early 2019.

As with all our briefs this is only a summary of how a no deal scenario will affect this area of business and is for guidance only. For full details please visit https://www.gov.uk/government/publications/state-aid-if-theres-no-brexit-deal/state-aid-if-theres-no-brexit-deal