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15th July 2018

State aid: Brexit update

Government White Paper 

The high-profile Cabinet discussions on the Government’s approach to Brexit negotiations have given rise to the White Paper entitled “The Future Relationship between the United Kingdom and the European Union”.  The proposal for state aid is a commitment to a “common rulebook” to be enforced and supervised in the UK by the Competition and Markets Authority (CMA).
We can expect that the EU state rules will be incorporated into domestic law in the UK on the basis of this proposal. The present General Block Exemption Regulation remains in force until 31 December 2020.  The extent to which the UK would be able to exert any influence as to the content of the replacement regulation will remain to be seen.

The White Paper states that the common rule book would not prejudice the Government’s intention to develop new arrangements in relation to payments to farmers and other land mangers for environmental benefits, and the UK’s future public procurement policy.

Preparations for new state aid framework

The National Audit Office (NAO) has reported on the status of preparations for the CMA to take on the role of the UK’s independent state aid authority.

Key matters reported by the NAO are:

  • State aid is an entirely new function for the CMA and will require additional staff and a new IT solution.
  • The CMA estimates that it will require 46 state aid staff by March 2019 if there is no deal agreed with the European Union.
  • The Department for Business, Energy & Industrial Strategy (BEIS) considers that it has a very tight timetable to incorporate EU state aid rules into UK law by 30 March 3019 in the event of a no-deal scenario, and it has prioritised the critical legal provisions.
  • BEIS and the CMA have been working to develop the detail of the post-Brexit state aid regime. The CMA considers that any further compression of the legislative timetable (like those experienced with the passage of the European Union (Withdrawal) Act 2018) will place pressure on their plans.
  • The CMA was allocated £3.3 million for state aid for 2018-19 in the Chancellor’s Spring Statement, including £0.9 million for developing an IT system. The CMA considers this to be sufficient for this year based on initial estimates and anticipated requirements.
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