Beyond Brexit transition – the impact on state aid

Contacts: Mark Jones, Matt Giles

What's the issue?

The UK and the EU have yet to agree a post-Brexit anti-subsidy regime.  It is one of the main sticking points in their current negotiations regime for a free trade agreement.  It has also proved politically contentious because in September the UK Government introduced legislation (the UK Internal Market Bill) that would allow it effectively to override the provisions in the UK-EU Withdrawal Agreement that provide for continuing application of the EU State aid rules to trade between Northern Ireland and the EU (the main interface of course being Northern Ireland’s border with the Republic of Ireland). 

Where are we now?

The UK remains subject to the EU State aid rules during the transition period under the Withdrawal Agreement that runs to the end of this year.   After that, absent agreement otherwise in the current trade negotiations, the UK will no longer be subject to the EU State aid rules – although the European Commission will retain its jurisdiction in EU State aid cases initiated before 31 December 2020 and will also have a four-year window to investigate any other State aid granted by the UK before then. 

What impact does this have?

The UK Government has stated that, if the transition period ends without a free trade deal between the UK and the EU, the UK will no longer follow the EU State aid rules and instead would be bound in its trade with the EU only by the World Trade Organisation Agreement on Subsidies and Countervailing Measures.  Previous planning for a new domestic anti-subsidy regime overseen by the UK Competition and Markets Authority appears to have been put on the back burner (although the Government did note recently that it would be consulting on this issue in due course).  A broad application of the EU State aid provisions in the Northern Ireland Protocol could impact on aid provided to businesses operating in Great Britain but, as noted, the Government may resist this.  Much uncertainty remains.

For more information on this issue please read State aid, Brexit and COVID-19.

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