State Aid - New Horizons
State aid has become one of the tensions in the UK-EU negotiations regarding a new deal. How it plays out will have important implications for the HE sector which relies heavily on grant funding for research and innovation projects.
The current EU State aid rules restrict the ability of a Member State to subsidise its own companies to ensure a level playing field across Europe.
As the UK economy recovers from coronavirus (COVID-19), the UK Government has signalled a desire to have greater flexibility to protect jobs and to support new and emerging industries now and into the future, particularly in the innovation sector.
As from the beginning of next year, the Business Secretary has announced that the UK will cease to apply the EU State aid rules and adopt the lighter touch WTO subsidy control regime pending the introduction of a new UK regime. Under the WTO rules, the prohibition on subsidies only applies to goods not services, a distortion of competition must be effects based rather than the current EU low threshold for any actual or potential impact on competition to suffice, and there are more limited remedies. Notably, the deterrent for beneficiaries to repay State aid plus interest does not apply.
A public consultation on what the new subsidy control regime will look like is expected later this year. You can read the UK Government's press release on its planned approach to subsidy control.
The HE sector has been one of the beneficiaries of grant funding through programmes such as HORIZON 2020, European Structural and Investment Funds, the UK Research and Innovation ('UKRI') Higher Education Innovation Fund ('HEIF') and Innovate UK calls for competition. For example, in 2020 UKRI had a budget of £250 million via the HEIF for knowledge exchange projects.
In practice, the HE sector relies heavily on a range of tools to manage the State aid risk, including the Framework for State aid for Research and Development and Innovation and the research exemptions under the State Aid General Block Exemption. (It is important to note that the risk of investigation and repayment under the EU State aid regime will continue for a period of 4 years after measures have been implemented.)
The move away towards a lighter touch subsidy control regime may present opportunities for the sector. In the meantime understanding the transitional rules pending a new UK subsidy regime coming into force, and how they apply to HE, for example whether the current block exemptions will remain, will be important and is rather unclear. We will keep you updated on developments as further information becomes available.
For specialist legal advice on State Aid, please contact Stephanie Rickard in our Procurement and State team on 07384 251896, or fill out the form below.