UK launches new subsidy system to aid business

A new state aid subsidy control system announced by the United Kingdom government on Wednesday will provide faster and "more flexible" support to businesses across the country post-Brexit.

Ministers said in a statement that the new system will enable key domestic priorities, such as leveling up economic growth, and drive the green industrial revolution.

Subsidies are financial contributions that use public resources, and might include a cash payment, a loan with interest below the market rate, or a guarantee. All levels of government in the UK administer such subsidies.

The new system will support selected industries, said Business Secretary Kwasi Kwarteng, adding that the rules would "empower public authorities across the UK to deliver financial support, without facing burdensome red tape".

Business Minister Paul Scully said: "The UK's new bespoke subsidy system will be simple, nimble, and based on common-sense principles."

The issue of state aid was a source of friction between the European Union and the UK during last year's Brexit trade deal negotiations, the Financial Times noted.

The EU had pushed for the UK to bring its rules in line with the bloc to maintain a "level-playing field "on public subsidies to businesses, but Prime Minister Boris Johnson sought a system more suited to Britain's needs.

In quotes released with the statement, Kwarteng said that the new system would be more "agile and flexible" and marked a departure from the EU regime.

He cautioned that the system would not be a "return to the failed 1970s approach" of the government trying to "run the economy, picking winners or bailing out unsustainable companies".

The FT noted that the new system may "revive complaints" from the devolved Scottish and Welsh governments, which had said that control over state aid policy should have come to them after Brexit.

The government statement said the new system would "start from the basis that subsidies are permitted if they follow UK-wide principles－delivering good value for the British taxpayer while being awarded in a timely and effective way".

It said it will set up a new "subsidy advance unit" within the Competition and Markets Authority, which The Times said would "arbitrate on whether a subsidy is fair".

The government said the new set-up would block any subsidies that lead to economic activity transferring from one region of the country to another.

The BBC noted that the UK will still be subject to World Trade Organization rules, and any decisions made can be contested in law courts.

Quoted by BBC News, Matthew Fell, chief UK policy director for the Confederation of British Industry, said EU state aid rules had "too often proved prohibitive and bureaucratic", and that the new system could be a "useful tool to meet the government's ambitions for the economy".