Government – guidance

State aid

What state aid is and how public authorities can make sure they comply with the rules.

Using taxpayer-funded resources to provide assistance to one or more organisations in a way that gives an advantage over others may be state aid.

Giving assistance as state aid will nearly always be more time consuming and difficult than designing assistance in a way that avoids doing so. Some state aid is illegal under EU rules because it distorts competition in a way that is harmful to citizens and companies in the EU. But where it is unavoidable, state aid can be given legally by:

  • using one of a set of approved EU mechanisms for state aid
  • by getting approval for the particular scheme from the EU Commission

What is state aid?

State aid is any advantage granted by public authorities through state resources on a selective basis to any organisations that could potentially distort competition and trade in the European Union (EU).

The definition of state aid is very broad because ‘an advantage’ can take many forms. It is anything which an undertaking (an organisation engaged in economic activity) could not get on the open market.

State aid rules

State aid rules can (among other things) apply to the following:

  • grants
  • loans
  • tax breaks
  • the use or sale of a state asset for free or at less than market price

The rules can apply to funding given to charities, public authorities and other non-profit making bodies where they are involved in commercial activities.

In principle, state aid is not allowed in the EU. However, some state aid is beneficial to the economy and supports growth and other policy objectives. State aid can be given to support a wide variety of activities including research and development, environmental protection and aid for small to medium-sized businesses. The state aid rules allow for good aid, which is necessary to deliver growth and other important objectives.

The UK supports the need for effective state aid rules to prevent distortion of competition and to create an open and competitive market in the EU on which UK firms can fairly compete and grow.

Compliance with the state aid rules

Public authorities are responsible for ensuring their policy measures and projects comply with the rules. They should think about state aid early and seek advice to avoid problems and save time.

The rules can be complex and getting it wrong can mean recovery of state aid and suspension or withdrawal of aid schemes. This might have serious consequences for the recipients of aid and the delivery of policy objectives.

If you are a public body and are intending to provide assistance you should first check whether or not the assistance is likely to be state aid.

Guidance

The Department for Business, Innovation and Skills (BIS) state aid team has developed guidance to help you understand the rules and the options available to you.

‘State aid: the basics guide’ provides an overview of how to assess and analyse state aid issues. For a more detailed and comprehensive guide on the state aid rules and frameworks see the State aid manual.

The guidance is not a replacement to the original regulations and guidelines. It is essential that you read the EU regulations on state aid which can be found on the EU Commissions website in conjunction with any guidance.

State aid contacts

The State aid team at BIS is responsible for state aid across the whole of government including local and regional government and the devolved administrations. We can help public authorities to:

  • understand the state aid issues involved in the design and development of your assistance
  • advise on how to reduce and manage this risk
  • advise on alternative options

Please complete the ‘State aid assessment form’ if you are planning to fund a project and contact us sapt@bis.gsi.gov.uk.

The BIS state aid team is only able to provide advice to public authorities and funding bodies. If you are a private company you should seek independent legal advice on how the state aid rules may apply.

If you are a private company or public authority seeking funding under an existing scheme or project and would like more information about how the rules apply you should contact the public authority who is administering that scheme or project.

Current Assisted Areas map

Assisted Areas are those locations where regional aid may be granted under EU legislation. The current Assisted Areas map came into effect on 1 July 2014, and remains in force until 31 December 2020 (subject to any mid-term review in 2016). Images of the map and a spreadsheet listing the Assisted Areas are available from the Assisted Areas Map consultation.

The map was drawn in response to the European Commission’s revised Regional Aid Guidelines for 2014 to 2020. A short factsheet is available with information on Assisted Areas status, and what it offers to potential applicants for regional aid.

Further help

The following organisations can provide help to public authorities and other organisations using public funding:

Although state aid is not devolved, each of the devolved administrations has their own state aid unit that can provide advice and guidance: