Subsidy control: guidance

Prohibited subsidies

The UK Subsidy Control regime prohibits specific kinds of subsidy and places conditions on the granting of other. Some examples of these include:

• unlimited guarantees
• subsidies dependent on export performance
• subsidies that are contingent on the use of domestically produced goods or services, often referred to as ‘local content’ subsidies
• relocation subsidies – where the subsidy contains a condition requiring relocation and the relocation would not occur without the subsidy
• subsidies to ailing or insolvent enterprises
• subsidies for air carriers for the operation of routes

Before giving a subsidy, a public authority must ensure that it is not prohibited and meets any specific requirements. Further information on prohibitions and other requirements in the Act can be found in Chapter 5 of the Subsidy Control Statutory Guidance.

The UK also has obligations under international agreements, such as the WTO Agreement on Subsidies and Countervailing Measures (ASCM) and several Fare Trade Agreements (FTA), as detailed below.

The WTO Agreement on Subsidies and Countervailing Measures (ASCM) contains two categories of prohibited subsidies, under which subsidies must not be given:

• subsidies dependent on export performance – for example, giving a subsidy to a widget manufacturer linked to exporting a certain tonnage of widgets to another country
• subsidies contingent on the use of domestic content – for example, stating that the beneficiary must use 50% UK manufactured widgets in their product

Several FTAs – including the UK-EU Trade and Cooperation Agreement (TCA) – expand the above prohibitions to cover services and include additional prohibitions. These include giving:

• unlimited State guarantees
• restructuring subsidy if the beneficiary does not have a valid plan in place to return the company to viability

The TCA includes some additional conditions for subsidies given to air carriers, energy/environment and large cross-border or international projects. These are not prohibitions but conditions which must be met.