U.K. Reveals Post-Brexit Subsidy Plan, Promising Swift Firm Aid

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The U.K. government announced its post-Brexit system for overseeing subsidies to companies, promising to make quicker decisions than when Britain was in the European Union.

Subsidies will be permitted if they follow certain principles like benefiting local communities and being good value for taxpayers, the U.K.'s Department for Business, Energy and Industrial Strategy said in a statement Wednesday. The system will be “more agile and flexible” than before Brexit, when the U.K. followed the EU's state aid regime and large subsidy awards required European Commission approval, Business Secretary Kwasi Kwarteng said.

“We want to use our newfound freedoms as an independent, sovereign country to empower public authorities across the U.K. to deliver financial support,” Kwarteng said. The new system will “back new and emerging British industries, create more jobs and make the U.K. the best possible place to start and grow a business,” he said.

The question of how the U.K. would regulate subsidies after Brexit was a contentious issue in its trade negotiations with the EU. Fearing that the U.K. may become an aggressive competitor for inward investment on its doorstep, the EU pushed for Britain to adopt a strong system for regulating domestic subsidies managed by an independent body.

In the U.K.-EU trade accord signed on Christmas Eve, the two sides agreed to prohibit certain subsidies -- such as to ailing or insolvent businesses that did not have a credible restructuring plan -- and to establish an independent body with “an appropriate role” in its subsidy control regime.

New Unit

Under the U.K.'s proposed plan, a new subsidies advice unit would be set up within the Competition and Markets Authority, an independent regulator, which would have oversight of the regime but no enforcement powers, BEIS said. Enforcement of the system would be through the U.K.'s courts and tribunal system, according to BEIS.

Prime Minister Boris Johnson is eager to demonstrate upsides from Britain's split from the EU, after a rocky five-year period since the referendum where trade and investment from the U.K.'s largest market have suffered. One of his main political promises is to spread wealth and opportunity around Britain, and the government said the new subsidy regime would support that goal.

When in the EU, the British government was able to award subsidies if they amounted to less than 200,000 euros ($238,000) over three consecutive years to a single company, or if they fell in an exempt category such as public infrastructure spending or environmental aid. Larger sums had to be notified to and approved by the European Commission.