What the UK could learn from the US on state aid rules

Linda J. Dodson

Some targeted investment is approved by Brussels, but typically these are in line with the long-term goals of the union, such as breaks and investments for companies that promote the bloc’s green energy targets.

Despite this, the UK remains low down in approved state aid compared to other countries. Just 0.38pc of Britain’s GDP is produced from businesses in receipt of aid, much lower than the 1.31pc in Germany and 0.76pc in France. This would indicate that it is not just Europe’s rules holding back state spending.

As the Tony Blair Institute’s Anton Spisak remarks: “It hasn’t been the restriction of Europe, it has been a domestic policy”.

By comparison, America’s state aid is rather more nondescript. Senior lecturer at the Chicago Law School Diane P Wood articulated the differences in her paper on the topic in 2013.

“Europe has developed a sophisticated regime for managing and regulating state aids, whereas the US has no systems that come close to any such organised effort,” she wrote.

Adopting the US approach to state aid could help free up Britain to apply more targeted investments.

“Support the UK government could introduce, for example, is tax breaks for the tech sector, to encourage these companies to set up themselves here in the UK, they could also help with R&D investment,” says Natura Gracia, an antitrust partner at law firm Linklaters.

“So you could give public grants for companies to set up technology centres or to develop their products here in the UK.”

Gracia says that the Northern Ireland protocol, introduced to avoid a hard border on the island of Ireland, could prevent Britain from having “full discretion” over what it can and cannot invest in.

“Under the protocol the EU state aid rules will continue to apply to subsidies which may affect trade in goods between Northern Ireland and the EU,” she says.

“So if there are subsidies for the tech sector which are implemented or applied in Northern Ireland this could potentially still be subject to approval by Brussels.”

Despite this, the tech sector will be well placed to benefit from increased autonomy around public investments.

“A lot of UK tech firms got an investment boost from Brexit because the currency went down in value,” says Access Partnership’s Kenny.

“There should be a core of resilient companies after the pandemic that would be good candidates for investment from the UK government.”

For Spisak, Britain’s focus should be more on the benefit of its newfound procurement rules rather than state aid. He says that Britain has always been good at creating cutting edge technology, but it fell down when it came to disseminating them through the economy, unlike the US.

Another stumbling block in repeating America’s success is the lack of an enormous military to try out various new technologies before putting them out to public use.

However, what Britain could excel in is medtech, with the NHS assuming the role the military did in DARPA’s success.

“There is so much work the Government could be doing, irrespective of those rules,” says Spisak.

“They could use markets more strategically where the state has a lot of control, like the NHS, to develop new technologies and conduct trials more quickly.

“All of these things are at the Government’s disposal, they just haven’t been thinking about them very strategically.”

Source Article

Next Post

Firms demand urgent support as Covid restrictions tighten

Industry chiefs have called for urgent support for businesses amid warnings that tighter restrictions on social gatherings could deal a further body blow to consumer confidence. Social gatherings of more than six people will be illegal in England from Monday as part of new rules introduced by the Prime Minister […]