As the UK steel industry continues to struggle, trade unions and other interested parties have called on the UK government to offer state support to the Port Talbot steelworks. This has not yet materialised, however, largely due to concerns over a potential breach of state aid rules. 

This article considers whether Brexit would eliminate obstacles to state support such that the UK government could rescue the Port Talbot steelworks and what the likely impact of Brexit would be on UK and other European businesses and on the UK economy.

Contact: Nicole Robins

Notes

[1] Centre for European Reform (2014), ‘The economic consequences of leaving the EU: The final report of the CER commission on the UK and the EU single market’, June.

[2] This agreement came into effect in 2002 as a result of Switzerland’s desire to accept EU legislation in this area to maintain competitiveness and to secure Switzerland as a key business location by ensuring access to European airspace. For further details, see Zurkinden, P. and Scholten, F. (2004), ‘State Aids in Switzerland: The Air Transport Agreement between the EU and Switzerland’, European State Aid Law Quarterly, 3:2.

[3] The Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’) notes that measures such as capital injections, loans and guarantees from the state ‘which distort or threaten to distort competition by favouring certain undertakings or the production of certain goods’ are considered a violation of the agreement. For further details, see World Trade Organization, ‘Agreement on Subsidies and Countervailing Measures’, accessed 13 April 2016.

[4] For a comparison between the European Commission’s state aid rules and the WTO mechanisms, see Ehlermann, C.D. and Goyette, M. (2006), ‘The Interface between EU State Aid Control and the WTO Disciplines on Subsidies’, European State Aid Law Quarterly, 5:4, p. 695.

[5] This would still be subject to WTO rules on state subsidies, but these are less stringent relative to EU state aid rules.

[6] For further details, see HM Government (2014), ‘Review of the Balance of Competences between the United Kingdom and the European Union. Competition and Consumer Policy Report’, Summer.

[7] For businesses that are already receiving some form of aid from other member states, this outcome could mean a loss of funds, unless the UK government were to proactively step in to replace the funding.

[8] Simmons & Simmons (2016), ‘Brexit: implications for State aid law’, 23 June.