Guidance on the new subsidy regime that applies from 4 January 2023.
The UK's new subsidy control regime began on 4 January 2023. The new regime is different from the previous EU State aid rules. It uses a principles-based approach similar to that in the UK-EU Trade and Cooperation Agreement. This means that public authorities self-assess their subsidies to ensure compliance. This allows for a more flexible approach to creating subsidy schemes and awarding subsidies. The regime places significant subsidy control and transparency responsibilities on public authorities.
Public authorities must carry out in-depth reviews, market analysis and principles assessments. This must be done before an award is made. They cannot make the case after the decision has been made. The regime also has stricter rules about when transparency requirements must be met.
What is a subsidy?
The new regime brings with it a new definition of what is a subsidy. If your answer to all 4 questions below is “yes”, your assistance is a subsidy.
- Is the financial assistance given, directly or indirectly, from public resources by a public authority?
- Does the financial assistance confer an economic advantage on one or more enterprises?
- Is the financial assistance specific? That is, has the economic advantage been provided to one (or more than one) enterprise, but not to others?
- Will the financial assistance have, or is it capable of having, an effect on competition or investment within the UK, or trade or investment between the UK and another country or territory?
If you believe your support is a subsidy, you will need to ensure it is compliant with the new UK subsidy regime. You will also need to ensure it is not a prohibited subsidy or one with additional conditions (see chapter 5 of the UK subsidy control statutory guidance). Where applicable, you will need to check that the support complies with the 7 subsidy control principles.
The 7 subsidy control principles
A: common interest
Subsidies should pursue a specific policy objective in order to remedy an identified market failure or address an equity rationale (such as social difficulties or distributional concerns or local or regional disadvantage).
Subsidies should be proportionate to their specific policy objective and limited to what is necessary to achieve it.
C: designed to change economic behaviour
Subsidies should be designed to bring about a change of economic behaviour of the beneficiary. That change, in relation to a subsidy, should be conducive to achieving the specific policy objective, and something that would not happen without the subsidy.
D: costs that would be funded anyway
Subsidies should not normally compensate for the costs the beneficiary would have funded in the absence of any subsidy.
E: least distortive means of achieving policy objective
Subsidies should be an appropriate policy instrument for achieving their specific policy objective and that objective cannot be achieved through other, less distortive, means.
F: competition and investment within the UK
Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition and investment within the UK.
G: beneficial effects outweigh negative effects
Subsidies' beneficial effects (in terms of achieving their specific policy objective) should outweigh any negative effects, including in particular negative effects on competition or investment within the UK and international trade and investment.
Energy and environment subsidies and schemes
In addition to the 7 principles, subsidies and schemes that relate to energy and/or the environment must be assessed against further energy and environment principles.
Subsidies and Schemes of Interest and Particular Interest (SSoI/SSoPI)
Subsidies with values over a certain threshold or in particularly sensitive sectors of the economy must go through an additional review process.
Public authorities must publish information on relevant subsidies they have awarded, or schemes they have created. The new transparency obligations are stricter than those under previous subsidy control regimes or EU State aid regulations.
Services of Public Economic Interest (SPEI)
Services of Public Economic Interest (SPEI) are essential services provided to the public. They are services which, without subsidy support, would not be supplied in an appropriate way or may not be supplied at all by the market.
As well as awarding standalone subsidies, public authorities are also able to create subsidy schemes. These schemes offer a set of rules that describes the eligibility and conditions for subsidies to be given under the scheme. Public authorities must assess these schemes against the subsidy control requirements (including the subsidy control principles). This is to ensure all awards made under the scheme are compatible with the UK’s subsidy control regime.
More information on Welsh Government subsidy schemes.
Other options for subsidy control cover
Minimal Financial Assistance (MFA)
MFA allows public authorities to award subsidies up to £315,000 without the need to obey many of the subsidy control requirements.
Services of Public Economic Interest Assistance (SPEIA)
SPEIA allows public authorities to award low value SPEI subsidies without complying with the majority of the subsidy control requirements.
More information on SPEIA can be found in chapter 7 of the UK subsidy control statutory guidance.
Legacy schemes are subsidy schemes that existed before 4 January 2023. These schemes do not need to comply with the requirements set out in the Subsidy Control Act 2022. However, the new transparency requirements still apply in the majority of cases.
Streamlined routes are subsidy schemes designed by UK government. These will allow public authorities across the UK to give certain types of subsidy without having to do their own assessments against the principles.
More information on Streamlined routes on GOV.UK.
Subsidies given in certain emergency situations are also exempt from some subsidy control requirements.
More information on these circumstances and other exceptions from the subsidy control rules can be found in chapter 8 of the UK subsidy control statutory guidance.