What's changing in the UK's subsidy control regime?

The UK subsidy control regime, established under the Subsidy Control Act 2022 (the Act), came into force on 4 January 2023, replacing the previous EU State Aid system. It governs public authorities' provision of financial assistance, ensuring compliance to avoid legal challenges, financial penalties, and project disruptions.

Highlights from UK subsidy control regime consultation

The Department for Business and Trade (DBT) consulted on the subsidy control regime between 26 November 2024 and 21 January 2025. This consultation sought stakeholder feedback primarily on two key areas:

1 How suitable is the referral threshold for subsidies to the CMA?

Currently, subsidies above £10 million (or £5 million in sensitive sectors, eg, steel, motor vehicles) must be referred to the Competition and Markets Authority (CMA). Subsidies between £5 million and £10 million can be voluntarily referred.

2 Creating new streamlined routes

Streamlined routes allow public authorities to award subsidies without individual CMA review when predefined conditions are met. This mechanism provides greater confidence and legal certainty, especially for high-frequency, low-risk projects. Existing routes include: local growth; research, development and innovation; and energy usage.

These two areas play a crucial role in refining how public authorities can lawfully and efficiently provide subsidies. Raising the threshold could reduce the number of mandatory referrals, speed up project delivery and allow the CMA to focus on high-risk subsidies improving regulatory efficiency. Additionally, introducing new streamlined routes would extend confidence and legal certainty to subsidies in other areas which reflect the evolving economic and social needs, such as cultural investment.

Issues raised by the stakeholder responses:

• Administrative burden – the £10 million threshold was considered too low, and the current streamlined routes seen bureaucratic and restrictive
• Unclear guidance – key definitions within the regime (such as, what constitutes an economic activity) remain vague, particularly around voluntary referrals; this ambiguity has led to risk-averse behaviour among public authorities
• Transparency database – there were some suggested improvements to the database’s functionality to improve user experience

Key changes ahead

Increasing the threshold for mandatory referrals to the CMA

The UK Government plans to raise the non-sensitive sector threshold from £10 million to £25 million, while the £5 million threshold for sensitive sectors remains unchanged.

Public authorities are required to refer any Subsidies and Schemes of Particular Interest (SSoPI) to the CMA. This process can be time-consuming and resource-intensive, potentially delaying subsidy awards. While this change is expected to reduce the number of subsidies requiring CMA assessment, there are concerns.

The DBT may unintentionally discourage these authorities from restructuring financial assistance to avoid subsidy classification, as they'll no longer need to submit assessments to the CMA. Subsidies can distort markets, so it's crucial for the DBT to implement proper incentives that encourage public authorities to explore alternative financial assistance options.

The decision may also lead to fewer mandatory referrals to the CMA, resulting in less precedent being made publicly available as a result of publicly available CMA analysis. This could reduce public authorities' understanding and effective assessment of subsidies.

Introducing two new streamlined routes

New routes for arts and community regeneration, with possible extensions to local infrastructure, will be introduced. The design of these new schemes will be critical to their success.

Consultation responses highlighted a few issues. These include overly bureaucratic and restrictive process, low intervention rate, and lack of clarity around both eligibility criteria and the evidence required to demonstrate compliance. If the new routes fail to address these concerns, there's a risk that the same inefficiencies will persist. This may reduce the attractiveness of these schemes and the UK’s competitiveness in delivering public support; when compared to the EU, equivalent types of mechanisms appear to have a significantly higher uptake.

Amendments to the transparency database regulations

Public authorities are required to register information, such as policy objective, subsidy amount, etc, on the subsidies they award via the subsidy transparency database maintained by DBT. This allows interested parties to access details of subsidies that may impact them, enabling them to challenge such subsidies.

The DBT has announced that in-scheme awards – those granted under a previously approved scheme – will no longer need to be separately uploaded to the transparency database. Only scheme-level information will be required, reducing administrative burden but maintaining necessary transparency.

This change will likely be welcomed by local authorities making frequent, small-scale awards. However, third parties rely on this data to assess compliance and identity grounds for legal challenge. The Government must make efforts to ensure that the right level of transparency is preserved to maintain accountability and minimise the risk of competition distortions.

What’s next? 

Implementation timeline

• 18 June 2025 – modifications to transparency requirements come into effect
• 4 August 2025 – threshold changes take effect
• Fixed timelines for new streamlined routes haven't been provided

Until then, public authorities face a strategic dilemma: continue under the current regime (with delays and higher administrative costs) or wait for the reforms (risking critical project delivery). Without accessible streamlined routes, their potential to simplify processes may remain unfulfilled. Swift improvements are crucial to align the subsidy regime with evolving needs, unlocking investment in key sectors, such as infrastructure and research and development (R&D), that drive social benefits.

Ensuring improvements are implemented swiftly, and that the subsidy regime remains aligned with the country’s evolving needs, is key to enable public authorities to effectively pursue their policies and foster economic growth. When well-designed, subsidies can play a crucial role in unlocking private investment – particularly in sectors where market failures exist, such as infrastructure, research and development, and regeneration. Investment in these areas often yields significant social benefits, for example, reducing inequalities and lowering carbon emissions.

CMA’s statutory review

Stakeholders have a chance to provide feedback on the UK subsidy control regime as the CMA's Subsidy Advice Unit (SAU) begins its first statutory review. The review will cover the referral process, the ability to challenge subsidies, thresholds, exemptions, and the regime's impact on UK competition and investment. The deadline for submissions is 24 June 2025, with final conclusions expected by mid-2026.

Three steps for public authorities to take now

1 Stay informed about regulatory changes
Keep abreast of key updates and modifications to the regulations.

2 Engage early with experts
Seek support from financial advisers with experience in structuring funding in a way that complies with the UK's subsidy control regime

3 Ensure legal and economic compliance
Collaborate with legal advisers and economists to confirm that transactions are commercially sound; minimise subsidy control risks, and ensure full compliance with the Subsidy Control Act.

To find more about our experience and how to access this support, contact our team:

Tom Middleton, Wayne Butcher or Marta Lopes.