Brexit: Competition and State Aid

Following on from Arfon Consulting’s musings earlier this year on the UK’s post-Brexit State Aid policy environment (see Can the UK ignore State Aid after Brexit?) the House of Lord’s EU Select Committee has added its authorative weight to the topic.

In a report published on 2nd February 2018, the Select Committee noted that the repatriation of State Aid and competition policy from the European Commission to the UK, while presenting opportunities for the development of a more tailored and responsive policy approach,  a UK-wide domestic State aid framework will still be needed [own emphasis] in order to meet WTO obligations and avoid intra-UK subsidy races.

Of particular interest to State Aid aficionados was the Select Committees findings that the European Treaty obligations in respect of State Aid have not, contrary to portrayed conventional wisdom in certain sectors of the UK’s body politic, overtly constrained the UK in terms of successfully awarding State Aid for major projects (Hinkley C springs to mind!).  In any case, other EU27 countries spend a far higher degree of their GDP on State Aid the Committee noted.

Turning to the proposed 2 year transition (or “implementation period”, the term preferred by the UK Government), the Committee noted that there was presently a lack of agreement on exactly when the UK will completely withdraw from the EU’s competition and State Aid regime.

This point is further complicated by differing interpretations by both sides in the Article 50 negotiations as to the future role of the Court of Justice of the European Union during the immediate aftermath of Brexit in March 2019.  Nevertheless, the Committee recommended that work begin to develop and shape a post-Brexit State Aid regime prior to withdrawal.

Commenting on the overall report , the Chairman of the EU Internal Market Sub-Committee, Lord Whitty, said:

“While our witnesses favoured on-going consistency between the UK and EU’s approach to competition matters, we were encouraged that they also saw opportunities for the UK to improve our competition regime after Brexit.”

“The Government needs to provide clarity on what the transition period will look like, and on their longer-term policy for competition matters – particularly in relation to State aid. To develop this policy, the Government will need to consult with the devolved administrations and local government, as well as businesses and consumer groups.”

Additional resources:

HL Paper 67 Brexit: Competition and State Aid, 2nd February 2018 [Pdf]

HL Paper 67 Brexit: Competition and State Aid, 2nd February 2018 [Html]

Press Release – Opportunity for a more effective competition regime post-Brexit

Inquiry homepage – http://www.parliament.uk/business/committees/committees-a-z/lords-select/eu-internal-market-subcommittee/inquiries/parliament-2017/brexit-competition-inquiry/