State Aid and Brexit
by Keith Nicholson
State aid funding confusion anybody?

Anyone who has received funding in the UK which is related in any way to state competitiveness will be familiar with the concept of state aid. The phrase is enough to send shivers down the spine of most bid writers experienced in ERDF/ESF funding applications, or any accountants unlucky enough to be asked to unravel whether or not state aid applies in a particular project. The idea behind state aid was to bring about a level playing field between EU member states in order to underpin their economic integration.

The principle of state aid is:
Government Advice
State aid is commonly found in projects which may be seen to give a competitive advantage such as those delivering some types of training services, enterprise and business activities and even support delivered to get people into work. There is a de minimus level of state aid, less than EUR 200,000 over three years which was a rule often applied to smaller funded projects.

So what’s the issue?

As a potential ‘no deal’ Brexit looms, the Prime Minister having recently suffered two fairly substantial defeats in the commons, we need to understand how an increasingly likely ‘no deal’ might affect those involved in currently delivering projects which have an element of state aid or those in the middle of, or contemplating funding applications with state aid considerations.

What will a ‘no deal’ Brexit mean for State Aid? The Competition and Markets Authority’s (CMA) state aid role is subject to the successful passage of the state aid ‘no deal’ Statutory Instrument through Parliament. The current advice from the UK Government is to ‘keep calm and carry on’ and has recently published its annual plan at this time when the timing and nature of the UK’s exit from the EU remain uncertain. The plan makes clear that CMA will be ready to step up to its additional responsibilities, including a new UK state aid function, whether at the end of March or later. Whilst a ‘no deal’ exit would present challenges in the short term, the period ahead also provides opportunities for the organisation to secure better outcomes for UK consumers and to take on a bigger role on the world stage. At least that’s the positive hope I have in that scenario.

Due to the continued uncertainty around EU exit, the CMA is publishing its priorities at a high level now but the picture changes quickly. It intends to continue to refine and explain its plans as clarity emerges. It’s a serious business. The CMA enters 2019/20 with a substantial volume of ongoing work and as at February 2019 has 23 competition enforcement cases; six consumer enforcement cases; 12 merger investigations, and two market studies under way. The most up to date information can be found here.

What is likely to happen?

The detail of state aid inside the information available on potential Brexit arrangements look lengthy and open to interpretation to my untrained legal eye. As with many of the issues surrounding Brexit, my strong suspicion is that the UK government, through the CMA, will ensure a continuity of the application of state aid rules similar if not the same as the current EU level application during any transition period while they figure out what to do. There appears to be no political motivation or practical reason to do otherwise. Medium to long-term, however, there may be a critical role in applying state aid rules with a bias towards UK entities competing in certain business areas or in certain geographical areas. It may actually become an effective method of stimulating areas of interest to the government and providing a level playing field to encourage excellence in delivery, entrepreneurial mindsets amongst the public, private and third sectors and in the words of our Prime Minister:
Theresa May Quote

This article was written by Keith Nicholson in February 2019. If you would like to discuss or comment on the content, please feel free to get in touch at keith.nicholson@kedaconsulting.co.uk or https://twitter.com/KEDA_Consulting