State aid rules prevent public bodies from subsidising business activity that will or could favour domestic businesses over their competitors located in other Member States. Any state aid is prohibited and beneficiaries can be required to repay state aid with interest. The current state aid legislation was drafted and implemented by the European Union and is enforced by the European Commission.
The Government has confirmed in its recent White Paper on the future relationship between the UK and the EU that: "[it] strongly supports a rigorous state aid system - this is good for taxpayers, consumers, and for business".
If the UK leaves the European Union without an agreement, the Government will create a UK-wide framework to prevent public funds from being used in an anti-competitive manner or to subsidise business activity. Initially this will be achieved by transposing the EU state aid rules into UK domestic legislation, retaining the existing block exemptions currently available.
The Competition and Markets Authority (CMA) will oversee state aid in the UK. Any approval for specific schemes already granted by the European Commission will remain valid. However going forward, any individual notifications that have not already been approved by the Commission on Brexit day will need to be submitted to the CMA.
This latest development confirms that the state aid regime is here to stay. In the short term, the technical note will provide certainty for public authorities and beneficiaries that the rules will remain the same (for better or worse).
The challenge will be for the CMA with their new task of overseeing state aid regulation in the UK, particularly if they are required to investigate anti-competitive practices implemented by the Government.