State aid – don’t get into a State, seek assistance

Is that a groan I hear? To be fair, it is the right response for such a poor pun, but I had to do something to try to grab your attention: this is an article about law after all, and European law at that. What is State aid, and what has it got to do with me? You might well ask.

Briefly put, State aid is a branch of European competition law. Along with the other main limbs of procurement and competition (or ‘antitrust’) its main aim is to help make the European Common Market into a level playing field for businesses competing across Europe. State aid concerns the extent to which the resources of a European Member State are allowed to support organisations in its own country, and so potentially distort free and fair competition.

If you get it wrong you could be asked to repay the full amount of the aid, plus interest. To make matters worse, the European Commission has enforcement rights up to 10 years after the aid is given. 10 years’ of compound interest doesn’t look good from any perspective.

State aid isn’t just about big subsidies, such as the Government’s bailout of Northern Rock a few years’ ago. It can also apply to community organisations and charities, and not just grants but also any other assistance that gives one a ‘leg up’ compared with competitors. But State aid is also rearing its head a fair amount at present too: bids for funding can be rejected if wrongly structured.

In the context of Regional Growth Fund (RGF) bids, there was some speculation that 75% of Round 1 bids had been rejected for State aid reasons. That figure does seem high and, if true, would almost certainly include bids that were rejected on State aid grounds as well as for other reasons, rather than being exclusively related to State aid. Now, clearly State aid isn’t the “be all and end all” and a successful bid must stack up in all areas of the form. However, the fact remains that, with the 1st July deadline for RGF bids approaching, State aid is part of the RGF form. A lot of people want to get their hands on the money and those reviewing the bids will probably use any reason they can to reject a bid and narrow down the field a bit.

Given that one answer to potential State aid is to restructure the project or programme, I would recommend that people look at the issues and take advice early on rather than leave it till the last minute and hope for the best. Don’t duck the issue and seek advice.

But then I would say that, wouldn’t I?

  1. adrian ashton Reply

    hear hear! this is a really important issue to have good advice around – especially as the officers responsible for enforcing State Aid rules often interprent and apply them differently to their colleagues…

    and it’s also worth pointing out that State Aid isn’t just about hard cash, but the value of support or resources that state cash pays for – such as the time of ‘free’ (paid for) business adviors or publicly subsidised training courses…

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