The UK’s Subsidy Control regime is now in its third year of operation and, in line with its statutory duty, the Competition and Markets Authority is in the process of gathering information to enable it to evaluate the effectiveness of the Subsidy Control Act 2022, including the impact this legislation has had upon competition and investment within the United Kingdom, ahead of submitting a comprehensive report on this subject for consideration by Parliament in Summer 2026. In this article, Alexander Rose and Jonathan Branton consider whether the Subsidy Control regime has been effective in delivering the objectives put forward at the time of its creation and, if not, what steps might be considered by Parliament to improve the regime.
Table of Contents:
- Background
- Objectives of the UK Subsidy Control Regime
- Key Differences Between the UK And the EU Regimes
- Has the UK’s Subsidy Control Regime Delivered Upon Its Objectives?
- What Are the Barriers Holding Back the UK Subsidy Control Regime and How Can Parliament Fix Them?
- Conclusion
Background
During the period that the UK was a member of the European Union, it was subject to the EU rules on State Aid. This regime seeks to ensure a level playing field exists for businesses trading across the European Union’s single market by regulating the circumstances in which State bodies within the EU can use their resources to award subsidies.[1]
As a member of the EU, the UK had a strong record for adhering to the State aid regime.[2] Indeed, the UK was known as “the staunchest supporter of tighter state aid rules” within the European Union, as “successive UK governments supported rigorous state aid controls”[3] as a means of ensuring public funding did not crowd out the growth of the private sector. Compliance with these rules also meant that when subsidies were offered, these were usually limited to the minimum necessary, thereby representing a good use of taxpayers’ money.
When the UK decided to leave the European Union, continued application of the State aid rules was contemplated as part of the Brexit process, but ultimately rejected, among other things, because the UK wanted to be “a rule-maker, not a rule-taker“.[4] This alongside the obvious benefits of regulating subsidies and the broader context of maintaining an effective Competition Law regime led the UK government to create its own regime, an initiative that was seen as “a win-win situation for the UK government: it would give the government a new domestic tool to strengthen fair competition and prevent subsidy races within the UK, and would make an agreement with the EU more likely“.[5]
The EU/UK Trade & Cooperation Agreement 2020 (TCA) laid down the bare bones of what the minimum standards of the parties’ respective regimes for the regulation of subsidies should contain, and in the short term, the UK simply adopted the TCA’s provisions on subsidies directly into UK law. The UK Subsidy Control regime, as we now know it, was then designed, during Boris Johnson’s administration, to be “a flexible, principles-based approach for the UK“. It was primarily built around the Subsidy Control Act 2022, which received Royal Assent on 28 April 2022, although the majority of provisions only came into effect on 4 January 2023. The TCA remains in force and regulates the parties’ relations in matters of subsidies, including the provision of a mechanism by which to seek to settle disputes. The Subsidy Control Act 2022, on the other hand, is a domestic instrument providing a statutory basis within UK law for the regulation of subsidies at home.
Objectives of the UK Subsidy Control Regime
The objectives of the UK Subsidy Control regime were listed in the explanatory notes accompanying the Act.[6] These are to:
(a) empower local authorities, public bodies, the UK Government and the devolved governments to design subsidies that deliver strong benefits for the UK taxpayer;
(b) enable public authorities to deliver strategic interventions to support the UK’s growth and other public policy priorities;
(c) provide certainty and confidence to businesses investing in the UK, by protecting against subsidies that risk causing distortive or harmful economic impacts, including to the UK internal market; and
(d) contribute to meeting the UK’s international commitments relating to subsidy regulation, including its international commitments under the WTO’s ASCM,[7] the TCA,[8] and in other free trade agreements.
Based on this, satisfying the UK’s international commitments on subsidies was only one consideration for the UK government in establishing the new regime, and this objective was balanced against delivering strong benefits for the UK taxpayer, supporting economic growth and protecting the UK’s internal market from distortive subsidies.
In terms of structure, the UK’s Subsidy Control regime shares many similarities with the EU State aid regime (for example, in each there is a central and very similar definition of what constitutes a subsidy and also similarly when this is met, a measure will need to follow prescribed processes) however there are also stark differences, most particularly in the detail and flexibility within which subsidy exemption criteria may be seen to be satisfied, but probably even more importantly in the context of enforcement.
Key Differences Between the UK And the EU Regimes
A key difference is the presumption that under the UK’s regime, a subsidy is lawful unless it is successfully challenged and shown to be otherwise. EU State aid law is based on the opposite dynamic, whereby a State aid only becomes lawful if certain steps have been followed prior to it being granted.
This places a much greater onus on the enforcement provisions within the UK’s Subsidy Control regime being effective. However the enforcement provisions within the UK’s Subsidy Control regime are also lighter than within the EU State aid regime, at least in terms of the timing in which challenges must be brought and the lack of an independent regulator (the EU system has an independent regulator empowered to investigate and if necessary declare a subsidy unlawful, in addition to remedies via the national court).
On the timing point, it is significant that a challenge in the UK courts may only be brought within a very short period. Indeed, a challenge is normally time-barred unless brought within one month[9] of the public authority placing information onto the National Transparency Database.[10] Conversely, it is possible for an interested party operating in the EU (most commonly a commercial rival of the recipient of subsidy) to bring a complaint to the European Commission and for it to start an investigation for up to 10 years from the last grant of subsidy. The possibility of this happening puts a far greater onus on compliance, given that any temptation to try and “ride out” the risk in the short term and then relax once the short (UK) limitation periods have passed would not cover the risk in EU law. Put another way, no one would realistically sign up for State aid and then pause for 10 years before doing anything, waiting until all risk had passed.
In terms of exemption criteria, there are several routes which a public authority in the UK can take to ensure that an award of subsidy is lawful, including ensuring a measure satisfies the seven Subsidy Control Principles set out at Schedule 1 of the Act. These Principles focus on issues such as evaluating the value of the subsidy, which is limited to what is required to achieve the identified public policy objective. But, significantly, they act as a catch-all for all potential circumstances due to their generality, and the primary judgement for whether they are duly satisfied or not is taken by the authority providing the measure in question (i.e., not by a court or an independent regulator). Conversely, the EU relies on a series of tightly drawn exemptions for different types of interventions, setting out respective conditions in each case. Where an intended measure cannot fit within the relevant criteria, then it falls to be notified to the European Commission to seek individual exemption.
There is no equivalent of this in the UK regime. The UK regime involves the UK’s independent competition regulator, the Competition & Markets Authority (CMA), but primarily only to review certain proposed subsidies deemed most at risk of distorting the market and provide an advisory opinion on the same. The CMA has no power to approve or deny such measures, nor to pursue complaints from third parties, nor to declare subsidies unlawful or issue repayment orders.
Has the UK’s Subsidy Control Regime Delivered Upon Its Objectives?
Largely, yes. Our view is that the UK Subsidy Control regime generally has delivered upon its stated objectives as writ10 above. Whether these were the right and a complete set of objectives is another matter, but in terms of what the stated objectives were, we consider them to have been reasonably effectively delivered, and the 2022 Act and all its constituent parts represent a coherent and well-thought-through regime.
However, the key question from our perspective is whether the UK regime has got the balance right between the objectives, noting crucially that if those objectives are analysed carefully, it can be seen that they are at least to some degree in conflict with each other, hence it is inevitable that to fulfil them all requires a careful balancing act. For example, a desire to make it easier for subsidies to be awarded will always be at least in partial conflict with a desire to protect a level playing field, on the basis that the latter would always start with a presumption that any level of subsidy distorts competition. This is why an effective regime will always be about striking the right balance between freedom for public authorities to intervene in the market where it considers it expedient to do so and protecting free competition.
The positive aspects of the UK regime are that it is a coherent framework with the flexibility to allow public authorities to design measures that deliver their public policy objectives. In our experience the freedom to move away from the more strait-jacketed approach in GBER and respective EU guidelines is a strong positive, as is the emphasis always on matching the subsidy to the objective and no more (e.g., in contrast many GBER exemptions are very “black and white” and offer no requirement on authorities to reduce subsidies to suit circumstances if this would be below the maximum levels authorised for different types of activity). Furthermore, there is confidence amongst businesses in the UK that, where the rules are met, a subsidy will generally be safe from challenge and so investments can be pursued with confidence. It also seems fair to say that the regime appears to align with the United Kingdom’s international (minimum) commitments in respect of subsidies, save perhaps for the discussion below.[11]
The negative aspects of the regime are harder to pinpoint, but certainly it is some commentators’ view that the challenge regime based solely on the UK courts, allied to the speed at which it is required to move and the costs entailed, is insufficiently accessible and/or too off-putting for interested parties. Moreover, the lack of a threat of investigation from a body like the European Commission might lead some authorities providing subsidies to be less rigorous with their attention to compliance than they might otherwise be. This view is effectively saying the balance between the different objectives may not be quite right and may be tilted just slightly too far in favour of public authorities and their flexibility to make subsidy awards and move on very quickly.
What Are the Barriers Holding Back the UK Subsidy Control Regime and How Can Parliament Fix Them?
Four main issues arguably act as barriers to the effectiveness of the regime at present. These are:
- Insufficient threat of jeopardy: The Subsidy Control Act 2022 was designed to be a challenge regime, in which it was originally expected that there would be between five and 10 cases per year.[12] This has not materialised (at least not yet). We are now in the third year of the regime, but, so far, there has not been a single instance of a measure being found to be unlawful under the Subsidy Control Act 2022 (two cases have been decided in favour of the public authority,[13] albeit with one appeal to be heard, and four more cases are either awaiting judgment or are due to be heard).[14] Whilst it remains comparatively early days, the regime relies upon there being a dynamic in which there is a reasonable amount of jeopardy, i.e., a genuine threat that if compliance is not carefully adhered to, a subsidy might be declared unlawful and repayment ordered. Some would say this threat is what is needed to drive public authorities to take compliance seriously. Four ways an improved compliance culture might be achieved (driven by greater jeopardy) are:
- Simplify the process for interested parties to bring a review. This might include amending the time limits for an application for review to be brought from one calendar month from the time information is placed on the national transparency database[15] to 40 working days, having the Department for Business and Trade publish template documents for competitors to use when preparing a challenge and/or reducing the court fees that must be paid when issuing proceedings.
- Clarify the legal standard in subsidy cases. There is a lack of clarity around the legal standard that will be applied when a challenge is brought. While a subsidy will be evaluated by the Competition Appeal Tribunal (CAT) against “ordinary judicial review principles“,[16] the level of scrutiny this entails is not yet clear[17]– beyond that, the CAT will likely evaluate whether a decision has been undermined by procedural error (for example, failure to take account of important information) or an issue affecting rationality (such as where the decision reached is outside the range of reasonable or the assessment contains a fundamental flaw in logic). What would be helpful in this regard, perhaps, is confirmation that evaluation of these points (procedure and rationality) will be undertaken methodically against each of the requirements of the Subsidy Control Act 2022. What this would mean in practice is that a public authority would need to have a record to show that it has fully considered each of the Principles, including taking account of all material considerations in reaching its decision.
- Empower the CMA to initiate investigations in limited circumstances. When the Subsidy Control Act 2022 was being designed, George Peretz KC wrote of a “substantial enforcement gap” within the regime as a result of “the absence of an independent body with powers to initiate investigations of non-published subsidies“.[18] This early concern appears to have been borne out by the operation of the regime to date. To address this, consideration might be given to creating a limited window within which the CMA could investigate a matter and publish a report with findings that would create a precedent for future practice. Some would go further still and say the subject matter of such a report might be reopened for a short period for a potential court challenge. Whether that would strike the right balance or not, however, would be open to question.
- Make more effective use of audit and clawback regimes. One way in which a compliance culture would be encouraged would be more real and effective use by central government bodies, in particular, of powers of audit and exercise of rights of clawback within grant funding agreements. Some funding regimes have deployed this in the past (most famously the EU’s ESIF programmes), and this has certainly had its effects in instilling a compliance culture and strong audit trails to protect against adverse findings at audit and resulting clawback.
- Insufficiently stringent requirements for Subsidy Schemes: Subsidy Schemes are frameworks which can be established by public authorities to make multiple awards of subsidy to many different beneficiaries. So far, over 1,400 schemes have been created and over 42,500 individual subsidies have been awarded under such cover. The Act has been designed so that subsidy schemes may only be challenged for a short period after their creation,[19] after which an interested party’s ability to challenge an award made under a scheme falls within a degree of ambiguity. At the time the legislation was being debated in Parliament, strong assurances were given that this would not create an enforcement gap because “the transparency requirements of the regime mean that a potential interested party will be able to identify whether their interests may be affected by the making of schemes and giving of subsidies“.[20] It is difficult to conclude that this has come to pass, and experience suggests that interested parties only take notice of something like this when it specifically benefits a competitor in a way they do not like, and not before. So far, there has not been a single challenge against the creation of a scheme,[21] whereas the use of schemes has proliferated. To address this, we recommend that stricter rules be implemented around schemes, in particular:
- (i) more stringent rules on the requirements that must be met to create a valid scheme, including more detailed information on the expected beneficiaries, as well as the sectors in which they operate;
- (ii) greater clarity as to when an award under a scheme may be challenged, for example, if the rules of the scheme do not appear to have been respected or the scheme not validly invoked; and
- (iii) setting an expectation that the duration of a scheme will be limited to four years[22] (noting that there are currently four schemes listed on the national transparency database with a state duration of 7,974 years[23] and 56 schemes that have an infinite duration).[24]
- Excessive administrative burden: Whilst c. 95%of EU State aid measures proceed under the cover of block exemptions, our research[25] showed that in Summer 2024, only c. 2.15% of subsidies proceed under the Streamlined Routes. It is of course true that Streamlined Routes do not play the same role in the UK regime as block exemptions do in the EU regime (a new State aid falling outside the block exemption has to be notified to the Commission, whereas a subsidy falling outside a streamlined route, but not so large as to be notifiable to the CMA, merely has to be assessed by the granting authority under section 12 or 13 of the Act). However, it nonetheless remains the case that, particularly for small granting authorities with no or very limited in-house expertise in subsidy control, the burden of properly assessing a subsidy under section 12 or 13 can be considerable and often disproportionate in the case of small subsidies with (at most) only a relatively local effect;[26] and
- Insufficient transparency: Despite the Statutory Guidance stating that “Subsidy transparency is a fundamental part of the UK’s subsidy control regime”[27] (as the regime relies upon challenges brought by interested parties) issues relating to the functionality of the transparency database mean that it is difficult for competitors to easily find or keep track of information on awards of subsidy and therefore decide whether to seek a review within the short challenge window. Problems include the entries not appearing on search engines such as Google, the inability to set up an email alert, and the inability to undertake a single search as to whether a subsidy has been awarded.[28] Moreover, the database does not allow mention of awards of financial assistance that are not considered a subsidy. Further, even where a subsidy is notified to the CMA for advice, the SAU’s published advice can be hard to understand without sight of the analysis that it is advising upon (the point has been made that it is like reading a peer review of an academic paper without being able to read the paper itself). This inability to match the commentary to the facts and assessments it is addressing reduces the extent to which the SAU’s advice is useful as guidance to authorities in other cases.
The above are four material areas in which it appears to us, after three years, that there is a case for tweaking rather than entirely reordering the regime. The counterbalance to this is precisely that the regime is only three years old. Yes, there has been limited case law to date, but the volume of cases is very gradually starting to rise. With all new regimes, sometimes it just takes one key case to change the environment considerably, and this may yet come sooner rather than later.
On balance then – and remembering the regime itself must always be about balance – there are certainly elements of the regime that at least so far call into question whether the balance between freedom to intervene and protection of competition is quite right. However, over such a short time frame, it is arguably too soon to be sure. In another year or two, the landscape may have evolved further without the need for material change.
Conclusion
The original question was: how can politicians reform the UK Subsidy Control regime to make it more effective, and should they?
We have outlined practical suggestions that would improve the balance of the regime, in that they seek to combat issues which might otherwise be seen as deficiencies or limit the scope for circumventions. However after only three years it remains arguably too early to be sure that this absolutely needs to happen now, or whether it might be advisable to hold off a little longer to see if the trends to date continue or whether a more natural equilibrium emerges from the clarifications provided by the Competition Appeal Tribunal when it reviews how the law applies to particular awards of subsidy.
Notes:
[1] In 2023, the EU State aid rules were supplemented by an additional regime built around the EU Foreign Subsidies Regulation. This aims to address a perceived loophole in the State aid rules, whereby a business trading in the EU single market may benefit from a financial contribution made by a non-EU country.
[2] According to ‘Where is the UK on State Aid and Subsidy Control Post Brexit?, Fiona Wishlade, University of Strathclyde, February 2021, the UK had “few recovery orders (repayment of unlawful aid by beneficiaries) imposed by the Commission – just five since 1999, compared with 37 for France, 53 for Italy and 67 for Germany“.
[3] House of Commons Library Research Briefing, 4 August 2021, P.6.
[4] International trade secretary Liam Fox: UK must be a rule-maker, not a rule-taker, after Brexit, City AM, 25 February 2018
[5] House of Commons Library Briefing, 19 October 2020, P.6
[6] Listed in the Competition and Markets Authority: Review of the Effectiveness and Impact of the UK’s Subsidy Control Act – Call for Inputs, 15 April 2025 (which refers to paragraph 6 of the Explanatory Notes to Subsidy Control Act 2022 and paragraph 1.23 of the UK subsidy control statutory guidance.
[7] World Trade Organisation’s Agreement on Subsidies and Countervailing Measures
[8] Trade and Cooperation Agreement between the United Kingdom of Great Britain and Northern Ireland, of the one part, and the European Union and the European Atomic Energy Community, of the other part, 30 December 2020.
[9] Or within that one-month period submitting a valid pre-action information request, which extends the duration of challenge by a further month (which runs from when the information is provided).
[10] https://searchforuksubsidies.beis.gov.uk
[11] Under Article 776 of the TCA, the EU and UK have agreed to review the TCA five years after it has come into force (May 2026) to determine whether there are issues relating to the TCA’s operation that need to be addressed. It seems likely that the EU will raise concerns about the independent oversight of the regime, given that the CMA lacks the ability to proactively investigate or take action.
[12] Table 10, Impact Assessment from Department for Business, Energy and Industrial Strategy, 14 March 2022
[13] The Durham Company Limited v Durham County Council [2023] CAT 50 [31] (we which acted upon) and Mr Aubrey Weis v Greater Manchester Combined Authority [2025] CAT 47
[14] The case of Bristol Airport v Welsh Ministers[14] relates to a £205.2m subsidy to improve Cardiff International Airport and was heard in February 2026, whilst the New Lottery Company Ltd and Others v The Gambling Commission relates to £70.21 million subsidy awarded to Camelot UK Lotteries Ltd and was heard in December 2025. The application to appeal in the case of BEK Developments Ltd and Others v Durham County Council was listed in December 2025, whilst the case of Zenobē Energy Limited v Gas and Electricity Markets Authority was listed in October 2025.
[15] From the date information is posted on the national transparency database, noting that a Pre-Action Information Request is available as a means to delay this time limit in order to find out more about the proposed measure
[16] Para 121, Mr Aubrey Weis v Greater Manchester Combined Authority [2025] CAT 47
[17] The legal standard may be clarified by future case law, in particular the Bristol Airport case
[18] Tax implications of the Subsidy Control Bill, Tax Journal, 1 October 2021
[19] A challenge window of one month from information being placed onto the transparency database about the scheme (this window can be extended should a Pre-Action Information Request be submitted by an interested party).
[20] Letter from Lord Callanan to Lord Fox, 28 March 2022
[21] Noting that this would be a speculative challenge in which the interested party would need to fund litigation, but it would not necessarily meet the commercial operator’s objectives because the public authority could set up another scheme or make an individual award to the rival business.
[22] Except where there is a strong reason to depart from this
[23] Due to end 31 December 9999
[24] As of 22 August 2025
[25] Based on 2024 data in ‘The UK’s Subsidy Control regime can be improved through more, better targeted Streamlined Routes’ which can be found here.
[26]The Community and Regeneration Streamlined Subsidy Scheme (C11450) and the Arts and Culture Streamlined Subsidy Scheme (SC11449) were created in January 2025, on the basis that these are areas where the public interest in a subsidy generally tends to be strong and any distortive effect weak: but we also believe that consideration should be given to exempting a wider range of measures to reduce the administration involved in awarding smaller and more routine subsidies.
[27] Paragraph 12.1
[28] Instead, the search function is split into four (standalone subsidies, subsidy schemes, subsidies awarded under subsidy schemes and MFA / SPEI Assistance awards). It would benefit the effectiveness of the regime to have a single search function for all subsidies.