EU still ruling us – UK firms locked out of Covid grants due to Brussels’ state aid rules

Brexit has ‘exposed consequences’ of leaving EU says Barnier

British businesses have been denied access to millions of pounds of support funding due to limitations imposed by the EU’s State Aid Temporary Framework. Earlier this month, Chancellor Rishi Sunak announced a package worth £4.6billion for UK firms to cope with the coronavirus crisis.

But, under the state aid terms, individual firms are now only allowed to receive a payment up to £3.6million (€4m).

Many firms have since reached the limit of Government support and their future remains in the balance.

Red tape surrounding state aid proved a huge stumbling block in trade negotiations with the EU.

Brussels chiefs insisted an agreement on Government intervention needed to be enforced to protect the EU single market and prevent the bloc from being undercut.

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Business leaders have lashed out at the decision and called on the UK Government to make an intervention.

Helen Dickinson, chief executive of the British Retail Consortium trade association, said: “It’s bizarre that EU state-aid rules are standing in the way of hundreds of millions of pounds of financial support that will protect jobs.

“The Government needs to look again at this decision, which could provide a lifeline to many businesses that have been forced to close because of Covid restrictions.”

Business representatives have also held talks in recent days with newly appointed Business Secretary Kwasi Kwarteng and business minister Paul Scully.

The Government has issued guidance to UK firms on rules regarding state aid and hinted changes could be on the way.

It stated: “The State Aid Temporary Framework provisions set out in previous guidance should still be applied to these schemes until further guidance on subsidy control related to these schemes is issued.”

Another Government source suggested the UK is considering tearing-up the current provisions.

They told the Financial Times: “This is part of the unravelling that needs to be done.”

Under the terms of the Trade and Corporation Treaty, the UK and EU can outline its own domestic programme.

But, challenges can be made to a new independent body if one side believes competition has been distorted.

With the UK remaining in lockdown, struggling business are able to claim another grant of up to £9,000 for each non-domestic property.

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But, there is confusion as to whether this top-up forms part of the wider £3.6m (€4m) limit outlined in the subsidy framework.

In a letter to the Chancellor seen by the FT, Ms Dickinson wrote “as a matter of urgency whether there is a limit to the sums that a business may receive through the January top-up grant scheme, and if so what the basis of any such limit is”.

A Government spokesman said: “Each business is able to access the equivalent of up to €4m from our various grant schemes, meaning there are no barriers to the vast majority of businesses seeking to access funding.”

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