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Regional and State aid Conference
Shane Rankin
June 2014
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What does State aid affect?
What’s in?– Organisations– Economic advantage– Liberalised markets
What’s not?– Individuals– Market terms – State functions
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What’s new?
• New approach• New opportunities• New procedures• New funding models
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State Aid Modernisation
Growth
FasterTougher
R & D
Low carbonHuman capital
More exemptions
Evaluations
Publication
Investigations Higher thresholds
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Fit with our prioritiesWealthier and Fairer
Healthier Safer and Stronger
Smarter Greener
Key sectors
Employability
Renewables sector
Sustainable transport
Increasing housebuilding
Reducing inequalities
Home insulation scheme
Strengthening communities funding
Regeneration Capital Grant Fund
Town Centre Housing Fund
Supporting employers
National training programmes
Rural development
Climate change
Zero waste
Energy efficiency
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What now?
• Attend workshops• Speak to State Aid Unit• Read relevant rules• Consider alternatives
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Regional aid and State aid Conference
Ana Richardson June 2014
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Outline
• What’s changed?• Why do I need to know this?• Can I continue current activities?• Can I do new things?
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What’s changed?In draft:• Notion of aid• Rescue and restructuring aid• Agriculture and forestry• Fisheries
Adopted:• Regional Aid• de minimis• R & D & I• Environmental and Energy • Risk Finance • Broadband • Aviation• General Block Exemption • Complaint-handling• Transparency
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Why?
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R & D & IAid objective Large Medium Small
Fundamental research: 100% 100% 100%
Industrial research:ExemptNotifiable
50-65%60-70%
60-75%70-80%
70-80%80-90%
Experimental development:
ExemptNotifiable
25-40%60-70%
35-50%70-80%
45-60%80-90%
Research infrastructure:
ExemptNotifiable
50%60%
50%60%
50%60%
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Environment and Energy
• Market based mechanisms• Promoting competitiveness• Supporting cross-border infrastructure• Security of electricity generation• Exempted categories
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Broadband
• Digital agenda • Technological neutrality
• Ultra-fast broadband networks • Step change to connectivity
• Reinforcement of open access
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Exempted aid
Exempted aid
New categories
Higher thresholds
Aid
amou
nt
Type of aid
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What’s new?New categories
Higher thresholds
Higher aid intensities
2007 - 2013
55%
2014 - 2020
65%
Fundamental research: €20m → €40mIndustrial research: €10m → €20m
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What’s next?• Ask us about your existing activities• Ask us about planned activities• Don’t be shy – we’re here to help you
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State Aid Modernisation:
Regional Aid and Assisted Areas Map 2014 – 2020
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Regional Aid: Potted summary
• Regional aid = state aid permissible due to the circumstances in certain regions
• Aid aimed at cohesion between regions, so targets regions which are relatively poorer than the EU average
• 2 stage process: rules for the EU; then mapping for the member state
• Aid is self-funded by member states• Regional Aid in Scotland distributed via SE, HIE and SDI;
LAs to SMEs; and occasionally BPRA grants for business premises
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Basic designation• Step 1: GDP per capita <75% of EU average
(3a status) (Commission decision)• Step 2: not ‘a status’, but difficult conditions
(former ‘a’, low density population) (Commission decision)
• Step 3: disadvantaged areas in developed member states (3c status) (Member State choice)– Based on lower GDP per capita and higher unemployment– Population allocation to member states, who then determine final
coverage
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20
Assisted Areas – 80 Years of Tradition?
-
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New map for Scotland
• Need AND opportunity – meets EU criteria, but area has to have a realistic prospect of using this particular form of aid for economic development and job creation
• Reassess every area of Scotland – but accept that those designated previously are some of the most deprived and have on-going need for support
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2014 map• Full H&I coverage – mix
of sparsely populated and ‘c’ coverage
• New areas in Angus, Borders, D&G, East and Midlothian
• Reframed areas around best opportunities in West, Ayrshires, Fife, Stirling and Falkirk
• Targeting SME investment sites more than large companies
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Main changes for 2014
• Stronger link to GBER – aid possible both under GBER and RAG
• Aid to large enterprises restricted to new investments and new products/processes
• Lower intervention rates than 2007 – down by 5%
• More detailed checks for incentive effects
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GBER scope• Regional or SME aid up to EUR 7.5m • But not where a company has closed down same activity
elsewhere in EEA in last 2 year, or plans to do so within next 2 years – no ‘aid-hopping’
• Usual restrictions apply!– Schemes with annual expenditure > EUR 150m– Aid to export related activities (which includes to another Member
State)– Aid contingent on use of domestic over imported goods– Aid to facilitate the closure of uncompetitive coal mines– Regional aid in steel, coal, shipbuilding, synthetic fibres, transport
and energy sectors, fisheries and agriculture– Schemes targeted at limited number of specific sectors– Undertakings in difficulty– Undertakings subject to an outstanding recovery order – Aid measures which violate Union law
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RAG scope
• Steel and synthetic fibres sectors can’t get regional aid• Fishery and aquaculture and transport sector subject to specific
rules, not the RAG. • RAG does not apply to aid to airports or the energy sector
(energy generation, distribution and infrastructure)• Does not apply to firms in difficulty• Can apply where outstanding recovery order - but will be a factor
in Commission’s decision• General rule – notify regional aid under the RAG – unless you
can give the aid under the New GBER• Common assessment principles – Commission uses these to
decide if aid will lead to increased R&D without adversely affecting trading conditions contrary to common interest
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Eligible costs(a)investment in tangible and intangible assets; (b)(b) estimated wage costs over 2 years OR (c)combination of (a) and (b) subject to cap of total (a) or
(b)• Wage costs – net increase in employees compared with average
over previous 12 months, jobs lost to be deducted from those created
• Posts filled within 3 years of completion of works• Any investment by same beneficiary (group level) in same NUTS 3
area within 3 years of start of works part of single investment project• Aid beneficiary to contribute at least 25% of eligible costs
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GBER: Investment aid to SMEs (new Article 17)
• Investment in tangible or intangible assets or estimated wage costs for 2 years
• Setting up a new establishment, extension of existing establishment, diversification of output into new products or a fundamental change to production process of existing establishment
• Acquisition of assets belonging to an establishment where it would otherwise have closed under market conditions
• 20% for small companies – 10% for medium
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Different rules
SME• any form of initial investment• Maintain jobs for 3 years• Assets do not need to be new• Lease must continue for 3
years• GBER options – article 14
regional aid in assisted areas; or article 17 investment aid
Large enterprise• initial investment in favour of
“new economic activity” in the area concerned
• Maintain jobs for 5 years• Assets must be new• Lease must continue for 5
years• costs of intangible assets only
up to 50% of total investment costs
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For example…SME• SME sets up, invests, creates jobs and maintains
them for three years and generally behaves…• Eligible anywhere in Scotland under GBER up to
EUR 7.5 m• 10% for SME’s in non-assisted areas• Option to use Article 17 SME investment aid
– 20% for SME’s, 10% for medium• Higher intervention rates in assisted areas
– 30/20/10% (small, medium, large) in ‘c’ areas– 35/25/15% in sparsely populated areas
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…and also…
Large Enterprise• Applies for aid exceeding
€7.5m – notified under RAG• Even if it’s for new product or
process? Yes, notify under RAG
Large enterprise• Launches new product
category in existing location – eligible under GBER as ‘new economic activity’ up to EUR 7.5 m
• Sets up in new NUTS 3 area without closing anything similar down in EEA – eligible under GBER up to EUR 7.5 m
• Establishes new and innovative process – not clear
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Q & A