Subsidy Control, 3.5 years on: BIST commit to evolution, not reform

Oliver Slater, Beatrice Wood and Aakash Vadher break down what the CMA's first periodic monitoring report means for public authorities and businesses, including what we can expect as the regime continues to bed in and develop.

The CMA published its first periodic monitoring report on the UK’s subsidy control regime at the end of June this year – a weighty 168 pages of it.

BIST (the Department for Business, Innovation, Science and Trade) has now had the chance to digest the report and respond. Its verdict, in short: the regime is broadly working, and the fixes will be incremental rather than sweeping.

Here’s what that means in practice.

The headline from BIST: the regime is working

BIST notes that the CMA’s assessment is largely positive. It states that the post-Brexit regime is doing what it was designed to do, giving public authorities flexibility and letting subsidies flow faster than under the old EU State Aid framework.

It also sets out that the Subsidy Advice Unit (SAU) process is helping authorities steer clear of poorly designed subsidies, and there’s early evidence of genuine investment benefits -particularly in energy and industrial projects that might not otherwise have gone ahead.

What the CMA’s review stated, and what BIST plans to do

The CMA grouped its review into three areas which it recommended BIST further considers.

BIST has accepted the core of them, but its response is notably about refinement rather than redesign:

Evolution, not reform

Clearly, this isn’t the wholesale overhaul some commentators have been pushing for – although that’s not necessarily a bad thing. It’s still early days: the regime is young, many subsidies’ effects will only become visible over the next several years, and the full impact on competition and investment remains unknown. Also, arguably, several of the criticisms levelled at the SCA have been overstated, and there’s real value in giving a young regime time to bed in rather than tearing it up.

That said, it’s notable what BIST has chosen not to touch. For example, there’s no move to refine the enforcement regime or the SAU referral process. The direction of travel (at least for now) is firmly toward tidying up guidance and smoothing the edges.

For public authorities and businesses alike, then, it looks like much the same for the time being. The next CMA monitoring report is due in 2029 to tell us how it’s holding up.

In the meantime, the regime will keep evolving and the Subsidy Control Team at Sharpe Pritchard will be on hand to provide updates as an when they arise.

Oliver Slater and Beatrice Wood are Associates and Aakash Vadher is a Paralegal at Sharpe Pritchard LLP.

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