As well as the start of a new year, January 2023 sees in the UK’s new subsidy control regime. From 4 January 2023, the Subsidy Control Act 2022 (the Act) replaces the transitional subsidy control regime which is in force under the 2020 EU/UK Trade and Cooperation Agreement.

With some differences, the new regime replaces EU State aid rules which were revoked after the UK withdrew from the EU. Unlike for State aid, the Act allows public authorities to award subsidies without the need for prior approval from a UK competent authority (European Commission prior approval is required for EU State aid, outside pre-agreed aid schemes).

Instead, and in a major change, public authorities will be able to self-assess the compliance of proposed subsidies against the subsidy control principles contained in the Act.

The Act introduces some other key changes for public authorities. Under Streamlined Routes for subsidies seen as at low risk of distorting markets, currently those for research, development and innovation, energy usage, and also local growth (levelling up) with more expected, public authorities will be able to award such subsidies quickly and efficiently. Importantly, Streamlined Routes are also exempt from referrals to the UK’s new Subsidy Advice Unit (SAU) which is part of the Competition and Markets Authority (CMA).

On the other hand, the Act creates Subsidies of Interest (SOI) and Subsidies of Particular Interest (SOPI), defined under separate Regulations, for ‘sensitive’ economic sectors such as steel and shipbuilding. As well as higher levels of scrutiny and control, there will be voluntary referrals to the SAU for SOIs, and mandatory referrals for SOPIs to the CMA.

The CMA have recently released guidance on how the SAU will discharge the CMA’s powers and functions under the Act. Broadly, the SAU will be responsible for providing independent advice to public authorities in relation to subsidies referred to the SAU, and for monitoring and reporting on the effectiveness of how the Act operates.

The Department for Business, Energy and Industrial Strategy (BEIS) plan online and in-person events to highlight key features of the new Subsidy Control regime and further guidance is expected to be published, to support public bodies adopting the new regime.

Overall, whilst the new Subsidy Control regime is far from all new (in replacing EU State aid), it will create short-term challenges for public authorities and the private sector alike, as they become familiar with the new subsidy control landscape.