What do the British Business Bank, Dudgeon Offshore Wind Farm, and support for energy intensive industries have in common? The answer: all of these schemes involved State aid.
State aid can occur whenever the state gives resources or benefits - money, buildings or people - to a commercial organisation. The definition of State aid can be surprisingly broad. For more information on what constitutes State aid, see the basics guide.
The European Commission is responsible for making and enforcing State aid rules, which apply equally across all EU Member States and ensure there is a fair Single Market. State aid has to be approved by the Commission before it is granted, unless it falls under certain exemptions.
Supporting economic growth
State aid might not always be headline news, but it is fundamental to growth in the UK and can have an effect on issues of national importance. On the one hand, strong State aid rules make sure UK firms are competing on a level playing field with their European competitors. These rules also help make the market competitive, because companies have to be innovative and efficient rather than relying on state subsidies.
On the other hand, where there is a real market failure, the government needs to be able to step in and support companies to deliver important priorities, such as infrastructure, research, development and innovation. Ultimately, well-targeted State aid means a better deal for UK taxpayers and consumers.
A case study
So how does it work in practice? A good recent example is the £50 million grant from the UK Government to Reaction Engines Ltd to help them further the design and development of their revolutionary SABRE engine. SABRE is a new aerospace engine that combines both air-breathing and rocket technologies, and will power a reusable spaceplane to launch satellites into space.
This innovative new engine has the potential to transform the economics of space access by making the launch costs of future missions significantly cheaper than currently possible. In 2015, the Commission found that the positive effects outweighed any potential distortion of competition – so the grant could be legally given.
How to find out more
If you want to find out more about State aid, take a look at the basics guide, or the State aid manual for more detailed information. These and other resources are available on our streamlined State aid website. If you are a policymaker looking for routine information on how the rules apply to your policy area, you can also use our State aid mail box, sapt@bis.gsi.gov.uk.