New UK laws to sweep away EU state aid rules

New legislation set to replace EU rules will grant the government and councils greater freedom to support businesses, the business secretary has said.

The Subsidy Control Bill will replace EU-wide state aid rules, which require member states to seek approval for government assistance to firms.

Ministers said the rules will allow the government to help companies with grants or loans faster.

It has been dubbed "the most important bit of post-Brexit legislation yet".

Business Secretary Kwasi Kwarteng said the government was using its "newfound freedoms" following Brexit to "empower public authorities across the UK to deliver financial support - without facing burdensome red tape".

"We're seizing the opportunities of being an independent trading nation to back new and emerging British industries, create more jobs and make the UK the best possible place to start and grow a business," he added.

The government has said the new bill would allow it to be more agile, targeted and timely in its interventions with businesses.

The government said the announcement would not "signal a return to the failed 1970s approach of government picking winners or bailing out unsustainable companies".

The UK has historically extended far less government support to private business than its EU counterparts in France and Germany and officials have historically said they do not expect the overall level of state aid to increase significantly.

The government said it will judge cases for support on whether they deliver good value for money and help hit targets such as "levelling up" and decarbonising the economy.

There will also be safeguards to ensure that devolved government departments and local authorities do not engage in bidding wars of support that could cause a relocation of businesses and jobs from one part of the UK to another.

Matthew Fell, chief UK policy director for the Confederation of British Industry, said a new "swift" system could be a "useful tool to meet the government's ambitions for the economy".

He said EU state aid rules were "too often proved prohibitive and bureaucratic".

"Government support is a last resort for businesses, but at the right time and place, it can make an invaluable contribution to key players and industries," he added.

"Smart decision-making that ensures value to the public purse, respects the level playing field agreement with the EU and supports economic growth in all parts of the UK, can only be a good thing."

However, the wording of the bill is set to be closely studied by the European Commission, which has expressed concerns the UK may distort competition by failing to ensure UK and EU firms operate on a so-called "level playing field". Competition lawyers have also warned the new rules may prove controversial.

Martin McElwee, a competition lawyer at Freshfields, said the government's new legislation offered "more flexibility", but "less certainty". He said businesses and lenders wouldn't find that loss of certainty easy.

"The EU subsidy regime was very complex, but we could help businesses, charities and public service providers understand what side of the line they fell on," he added.

"If you are a bank thinking about whether to lend to a business that's received support from the government, isn't certainty what you need?"

A new unit to issue advice on operating the new regime will be set up within the existing Competition and Markets Authority - but the CMA will have no powers to prohibit the granting of support.

The UK will still be subject to World Trade Organisation rules and any decisions made can be contested in law courts.