The Subsidy Advice Unit: Making a Referral

Beatrice Wood talks through the process of making a referral to the Subsidy Advice Unit.

Following the publication of subsidy control principle assessment guidance for subsidies and subsidies or schemes of interest (“SSoIs”) or subsidy or schemes of particular interest (“SSoPIs”) on 9 December 2024, we consider the process of making a referral to the Subsidy Advice Unit (“SAU”).

The SAU is part of the Competition and Markets Authority and is responsible for exercising certain functions as set out in Part 4 of the Subsidy Control Act 2022 (the “Act”). Under the Act, a public authority is required to refer certain types of subsidies or subsidy schemes to the SAU before giving the subsidy. The SAU may then undertake an assessment of the proposed subsidy and provide the public authority with a report.

Through its report, the SAU aims to “support public authorities’ decision making regarding the design and assessment of subsidies to help ensure that they are based on a strong assessment of their compliance with the Subsidy Control Requirements”.[1]

It provides non-binding advice to public authorities in respect of proposed subsidies and subsidy schemes of interest or particular interest. Regardless of the advice provided by the SAU, the public authority making the award is responsible for the ultimate decision as to whether to award the subsidy or make the subsidy scheme.

The government has issued specific guidance as an overview of the process of referral to the SAU for public authorities.

Additionally, in November 2022, guidance was issued by the government on the operation of the subsidy control functions of the SAU. This includes detail in relation to the process of making a referral to the SAU.

Which subsidies should be referred?

Under section 52 of the Act, public authorities must refer the subsidy and request a report from the SAU: before awarding a SSoPI; or where directed to do so by the Secretary of State under section 55 of the Act.

As provided by the Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022 (the “SC Regulations”), a subsidy is of particular interest if all of the below criteria apply:

• the subsidy exceeds £1 million;
• the total amount of subsidy and any other related subsidy given to the same enterprise within the last three financial years exceeds £10 million[2]; and
• none of the provisions mentioned in regulation 4(4) of the SC Regulations apply to the giving of the subsidy.

Under section 56 of the Act, public authorities may refer a SSoI to the SAU voluntarily.

A subsidy is a SSoI if it is not a SSoPI, and at least one of the following criteria apply:

• The total subsidy amount, and any related subsidy given to the same enterprise within the last three financial years, exceeds £5 million.
• The subsidy is subject to one of the following sections of the Act, making it automatically unlawful unless certain conditions are met:
• Section 18 (Relocation of Activities),
• Section 19 (Rescuing) of the Act,
• Section 22 (Liquidating deposit takers or insurance companies),
• Section 23 (Liquidity provision for deposit takers or insurance companies).
• The subsidy is given in a subsidy scheme made in the form of a tax measure.

If the subsidy is a SSoI, detailed consideration as to whether the subsidy is automatically unlawful should have been undertaken.

Please note that, as of time of writing, it is understood that no voluntary subsidy referrals have been accepted by the SAU.

Before referral

The Statutory Guidance for the United Kingdom Subsidy Control Regime encourages public authorities to engage with the SAU for early discussion on potential referrals before formally submitting a report.

The SAU can provide guidance on how the referral process works, what information is needed to be submitted in addition to an assessment of compliance with the requirements of Chapters 1 and 2 of Part 2 of the Act, and next steps for timings. Discussions can take any length of time between one week to two or three months, depending on the complexity of the subsidy.

If successful, these discussions will hopefully reduce the risk that the SAU rejects the request for being incomplete and helps to ensure that the SAU has the information needed to consider the assessment. The SAU will be more familiar with the subject matter of the subsidy by the time the referral is made, allowing them to progress the referral more efficiently.

Public authorities should submit their request for a report before making the subsidy in order to avoid being required to make a post-award referral. In this scenario, the Secretary of State can refer a subsidy or scheme to the SAU post-award, if they consider the subsidy or subsidy scheme fails to comply with the Subsidy Control Requirements (the “Principles”) or there is a risk of negative effects on competition.

Making the referral

Referrals should be made through the SAU’s Public Authority Portal (“PAP”).

Referral requests must include an explanation of why the subsidy or scheme meets the definition of an SSoPI for mandatory referrals, or SSoI for voluntary referrals. They must also include an assessment undertaken by the public authority on the subsidy or the scheme’s compliance with the Principles. Reasoning and evidence should be included, as well as all the information that the public authority will ultimately be required to upload to the subsidy database, should the subsidy be awarded.

In their assessments, public authorities must consider the seven Principles as set out below:

• Principle A: The subsidy should pursue a specific policy objective to remedy an identifiable market failure or address and equity rationale.

• Principle B: The subsidy should be proportionate to their specific policy objective and limited to what is necessary to achieve it.

• Principle C: Ensuring the subsidy is designed to bring about a change of economic behaviour of the beneficiary which should be conducive to achieving its specific policy objective, and something that would not happen without the subsidy.

• Principle D: The subsidy should not usually compensate for the costs the beneficiary would have funded in the absence of a subsidy.

• Principle E: The subsidy should be the least distortive means and more appropriate policy instrument for achieving the specific policy objective.

• Principle F: The subsidy should be designed to achieve the specific policy objective, while also minimising negative effects on competition or investment within the UK.

• Principle G: The beneficial effects of the subsidy should outweigh its negative effects, including particular negative effects on competition or investment within the UK or international trade and investment.

If relevant, the authority should also consider the energy and environment principles and compliance with prohibitions and other requirements of the Act. Any evidence provided as part of an assessment against the Principles should include representations that the public authority has collected from third parties.

Importantly, documents must be submitted in a readable and searchable format, with confidential information clearly identified.

After referral

Within 5 working days of receipt of the referral, the SAU undertakes a preliminary assessment to decide whether it will provide a report.

The SAU will notify the public authority of its decision to accept, reject or decline the request. If accepted, the SAU will publish details of the referral. If rejected, the public authority may submit a new request once they have addressed the issues identified by the SAU. The subsidy cannot be made in the absence of a new submission.

If the referral is accepted, the SAU will consider and publish a report on the assessment within 30 working days, this period beginning on the date the SAU confirms the request has provided certain minimum notice. This period may be extended if agreed between the SAU and the public authority, or, for mandatory or post-award referrals, by the Secretary of State.

During this time, third parties will have a window (typically 10 days) during which they will be allowed to make representations to the SAU in relation to the proposed subsidy. The SAU may take these into account in their assessment, provided they are relevant to the SAU’s statutory functions, but will not generally publish them.

When the report is published, it will include an evaluation of the public authorities’ assessment of the Principles. The SAU can, but do not have to, include advice in their report about how the public authority’s assessment might be improved or the subsidy modified to ensure compliance with the Act, although at the time of writing this has been a feature of all SAU reports published to date. Copies of the report will be provided to the public authority in question and to the Secretary of State.

Note that reports published by the SAU receive public attention. Although they are non-binding, a negative report can generate legal and political pressure in respect of a subsidy or subsidy scheme. Accordingly, authorities should ensure each assessment is as strong as it can be before it is before referring to the SAU.

Sharpe Pritchard LLP has experience advising contracting authorities on the mandatory referral process of a subsidy of particular interest and are fully conversant with the requirements and procedures of the new legal regime. We advise authorities and beneficiaries across a wide variety of subsidy control matters.

Additional Author: Nathalie Evans, Trainee Solicitor (seconded from Government Legal Department).

Beatrice Wood is a Junior Associate at Sharpe Pritchard LLP.

This video is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email This email address is being protected from spambots. You need JavaScript enabled to view it..

[1] ‘Operations of the subsidy control functions of the Subsidy Advice Unit’, Operation of the subsidy control functions of the Subsidy Advice Unit – GOV.UK, accessed 14 November 2024.

[2] Please note that a reduced threshold of £5m applies for subsidies awarded in so-called “sensitive sectors”. The Schedule to the SC Regulations lists the sensitive sectors with their SIC Codes.