Briefing paper

State aid rules and Brexit

23 Jan 2019

The EU’s policy of state aid control has become a focal point of debate since the UK’s 2016 referendum. Some proponents of leaving the EU have argued that, freed from the constraints of EU rules on state aid, the UK would have more flexibility to embark on an active industrial policy; opponents have countered that this overstates the stringency of the rules. This short briefing seeks to assess these claims, exploring the role of state aid rules in the EU and how these might change under different Brexit scenarios.

The briefing finds that EU state rules do not prevent an active industrial policy. Instead, the EU allows state aid directed towards a range of key progressive priorities, such as regional development, environmental protection, and support for small businesses. It restricts state aid where it wastes public money and exacerbates pan-European inequalities. Moreover, EU rules do not prevent nationalisation and explicitly allow for public ownership in the rail industry and other areas of the economy. The evidence suggests that the UK has spent far less on state aid than most other EU countries: in 2016 state aid expenditure in the UK was €8.6 billion, compared with €14.5 billion in France and €41.1 billion in Germany. Finally, this briefing’s analysis of the withdrawal agreement indicates that the UK would be expected to follow the same state aid rules under any future relationship with the EU. Leaving the EU therefore provides no additional flexibility in the application of state aid policy

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