Subsidy control is back(ing) business and driving growth
Key updates to the Subsidy Control Act 2022 and what they mean for public bodies and businesses.
One of the key aims of the Government's Industrial Strategy is to make it simpler for companies to do business, giving them stability to invest for the long term. The Subsidy Control Act 2022, now well established, is evolving to reflect this ambition - by reducing the burden on public bodies granting subsidies to support business and promote economic growth, while ensuring compliance with the rules.
Here, we set out the key updates, what they mean public bodies and businesses, and how we can help you navigate this complex area.
What's new
Higher thresholds for mandatory referrals
From 4 August 2025, the threshold for mandatory referrals to the Competition and Markets Authority (CMA) for an independent advisory review into proposed subsidies has increased from £10m to £25m for most sectors. The £5m threshold remains for sensitive sectors. Mandatory referrals can be time-consuming for both a public body and the CMA. Since the Act came into force, 96 mandatory referrals have been made; much higher than anticipated. This change allows the CMA to focus on higher-value subsidies that could impact competition and reduces delays on public bodies in implementing subsidies.
The message for public bodies and business remains clear - all subsidies should still be carefully scrutinised against the subsidy control principles, with a detailed record kept of the decision-making process and supporting evidence. Updated guidance published by the Department for Business and Trade can be found in the Subsidy control principles assessment guide
Importantly, the assessment process should be made at the time of the proposed subsidy decision, based on the information available at the time of the decision and foreseeable developments. This was recently reinforced in the Competition Appeal Tribunal decision in Mr Aubrey Weis v Greater Manchester Combined Authority.
Sector-specific exemptions
Several sectors are already benefitting from exemptions under the Act, aimed to promote growth.
Under section 64(3) of the Act, the Government may decide to individually exempt particular subsidies or subsidy schemes from mandatory referral. This right has been used for the first time by the Government in relation to the electric car grants scheme, which offers up to £3750 per qualifying car for car manufacturers, due to urgent and exceptional circumstances.
New streamlined routes are also being developed for subsidies in community regeneration and the arts and culture sector. The exemption for the arts and culture sectors will be welcomed by charities and other organisations, many of whom benefitted from similar exemptions under the previous State aid rules.
The number of referrals of community regeneration schemes to the CMA (which accounts for more than 15% of the total referrals) is a clear indication why a streamline route is needed. However, the relatively low cap on the maximum amount of aid permitted could limit their use for higher-value community regeneration schemes
What does recent case law tell us?
A complainant's right of redress in relation to a subsidy control decision is by way of judicial review in the Competition Appeal Tribunal (CAT).
The number of appeals remain low but the trend seems to be upwards, with two appeals lodged in the last quarter.
Of the four cases to date, three focus on whether a measure constitutes a subsidy in the first place, including if financial assistance is on market terms and therefore does not confer an economic advantage, and financial assistance in the form of marketing support.
The issue in the Weis case mentioned above was whether financial assistance in relation to a property development transaction was on market terms applying the Commercial Market Operator (CMO) principle i.e. would a commercial market operator have lent money on similar terms.
The CAT noted that the public authority was supported by experienced officers and external advisers who had considerable and positive experience in lending" and an "interest and incentive in obtaining commercial terms". This was a determining factor in finding that the transaction was on market terms. The CAT also adopted the same CMO principles as applied in State aid caselaw. This ruling provides helpful clarity because many public bodies are seeking to rely upon the CMO principles to avoid financial assistance being subject to the subsidy control rules.
The most recent appeal by Bristol Airport is interesting as it is the first case to challenge a subsidy reviewed by the CMA. The appeal relates to a decision by the Welsh Government to provide subsidies of £205m to Cardiff Airport. The grounds of challenge allege a failure to have regard to the subsidy control principles under the Act. As CMA reports are non-binding, we will be looking to see how much weight the CAT gives to the CMA review process.
Key takeaways for public bodies
To help manage the risk of subsidies, public bodies should:
- be clear as to what is and what is not a subsidy
- ensure you have all the relevant information
- consider what supporting evidence is required and take reasonable steps to obtain relevant supporting evidence
- keep a detailed and contemporaneous justification of your decision-making process.
The level of scrutiny should be proportionate to the value of your project or scheme.
For complainants, the standard of proof remains high. In the two cases decided to date, there has been no finding of a subsidy. In the Weis case, the CAT confirmed that a public authority is afforded a "wide margin of judgment" in reaching decisions and the CAT will avoid substituting its own view for the decision-makers unless the public authority has acted irrationally.
How we can help you
If you have any questions or need support with subsidy control issues, please don’t hesitate to get in touch. We’re here to provide practical, expert advice and help you navigate this complex area with confidence.
Our team can:
- Assess if a proposed subsidy complies with the subsidy control principles
- Advise on exemptions, streamlined routes and reporting requirements
- Prepare robust records and evidence to justify decisions
- For businesses, review grant funding arrangements to ensure compliance and advise on opportunities and risks in your sector