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What is state aid?

The term ‘state aid’ refers to a form of assistance from public funded resources which is used to support organisations or businesses. This can range from government departments and local authorities to institutions such as the Big Lottery Fund.

State aid rules are designed to prevent the use of this support in ways that distort competition and free trade in the EU.

Although the EU Treaty does not include a precise definition of what constitutes state aid, the Commission has declared that it includes:

  • Grants
  • Direct subsidies
  • Tax exemptions
  • Preferential interest rates
  • Loans guarantees
  • Provision of goods or services on preferential terms
  • Indemnities against losses
  • Contracts not open to competitive tendering

The rules restrict the support the public sector may provide to civil society organisations that operate in a commercial or economic environment. They do not apply to the whole of the sector, but only where the support could inhibit fair competition with other businesses.

Structural funds are considered as national resources and may therefore constitute as state aid. Note that public match funding to accompany European Structural Funds (ESF) must also comply with state aid rules where it constitutes state aid.

Useful links

For a helpful guide, please see the UK government’s State aid: beginner's guide (Department for Business, Innovation and Skills).

Compilation of state aid rules in force as of 15 April 2014

New rule book for Risk Finance State Aid (Issue 1 of the Competition Policy Brief)

There is also more information on the BIS state aid web pages.

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