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Government publishes position on state aid in event of ‘no deal’ Brexit

The government has published guidance on how the state aid rules would operate if the UK leaves the EU in March 2019 with ‘no deal’.

The guidance is one of 25 documents published by the Department for Exiting the European Union. These cover a range of issues such as: applying for EU-funded programmes; labelling produces and making them safe; regulating medicines and medical equipment; studying in the UK or EU; and workplace rights.

The technical notices “set out information to allow businesses and citizens to understand what they would need to do in a ‘no deal’ scenario, so they can make informed plans and preparations”, the government said.

It insisted, however, that a scenario in which the UK leaves the EU without agreement “remains unlikely given the mutual interests of the UK and the EU in securing a negotiated outcome”.

The state aid paper, which can be viewed here, states amongst other things that after 29 March 2019 if there is ‘no deal’:

  • The government will create a UK-wide subsidy control framework "to ensure the continuing control of anti-competitive subsidies".
  • The EU state aid rules will be transposed into UK domestic legislation under the European Union (Withdrawal) Act. “This will apply to all sectors; and will mirror existing block exemptions as allowed under the current rules, including the Agricultural Block Exemption Regulation, and the Fisheries Block Exemption Regulation.”
  • The Competition and Markets Authority (CMA) will take on the role of enforcement and supervision for the whole of the UK.
  • The UK government will continue to work with the devolved administrations "to ensure the new state aid regime works for the whole of the UK".

The government said the new regime would apply to all businesses with operations in the UK – whether UK, EU or third country based. From that point:

  • UK public authorities will need to notify state aid to any undertaking, through either the block exemption or through a full notification to the CMA instead of the European Commission
  • Existing approvals of state aid, including block exemption approvals, will remain valid and will be carried over into UK law under the Withdrawal Act.
  • Any full notifications not yet approved by the Commission should be submitted to the CMA.

The government stressed that UK businesses and EU businesses with operations in the UK will still be able to receive state aid from UK public authorities in accordance with the UK state aid rules.

Any complaints from businesses about unlawful aid or the misuse of aid should be made to the CMA, it added.

The government intends to pass secondary legislation under the Withdrawal Act in autumn 2018. “This will replicate the existing state aid framework, with only technical modifications to correct deficiencies with the transposed EU law to ensure the regime operates effectively in a domestic context.”

After legislation has passed, the CMA will publish its own guidance explaining in more detail how it will operate its state aid regulatory function.