Out-Law News 3 min. read
08 Jul 2016, 9:51 am
This is part of Out-Law's series of news and insights from Pinsent Masons experts on the impact of the UK's EU referendum. Watch our video on the issues facing businesses and sign up to receive our 'What next?' checklist.
Speaking at a UK parliamentary inquiry into the future of the UK steel industry earlier this week, small business minister Anna Soubry said the UK would probably have to decide whether having more freedom to support ailing industries with public funds is preferable to losing access to the EU single market.
"Whilst we are still members of the EU we play by the rules," Soubry said. "If we want access to the single market it may well be that we can't do our own rules when it comes to state aid. I don't know of any country that has access to the single market but then is not bound by state aid rules."
"I can't imagine that the EU would allow us access to the single market but not make us party to the state aid rules. These are the decisions that we have to make as a nation. If we don't want to be bound by state aid rules then we may not be able to have access to the single market. My own view is then we get into some very difficult, choppy water," she said.
Soubry said that World Trade Organisation rules would still apply to the UK even if the EU state aid rules do not apply to it post-Brexit. The WTO rules contain restrictions on state aid.
Caroline Ramsay, specialist in state aid regulations at Pinsent Masons, the law firm behind Out-Law.com, said recently that organisations cannot afford to "cast aside" the state aid rulebook just because the UK has voted to leave the EU.
"If UK aid granting bodies, or recipients, now cast state aid compliance to the side and we end up in either a single market bespoke trade agreement or the EEA, it is likely that these bodies would find themselves custodians of projects which would be unlawful under that trade agreement and that would give rise to a significant legal and commercial liability," Ramsay said.
"Given the current and future uncertainty over how state aid will be regulated, and the current variety of pre-existing state aid exemptions, it would be wise for aid granting authorities and recipients to consider their future pipeline of projects and, if appropriate, bring forward dealing with state aid now rather than leave it until the new regime is in place when it may have much less choice in terms of state aid validation. For example, WTO regulation, which has no exemptions, only prohibitions," she said.
In her evidence session Soubry said that she would be opposed to the UK imposing its own tariffs on steel imports once the country leaves the EU. She said that if the UK has access to the EU single market then the UK will not have the freedom to set its own tariffs in any case.
"I believe in free trade," she said. "My own view is that I am not convinced that tariff walls are the way to solve the big problems some of our key industries like steel face, but I may be wrong on that."
The parliamentary inquiry comes as the steel industry across Europe struggles to compete against competition from China. Chinese steel producers have been accused of 'dumping' cheap steel in the EU market, driving down the price of steel. Many steel companies in the EU have faced financial difficulties in recent times, including Tata Steel, the Indian company which took over the now-privatised British Steel, which is seeking a buyer for its struggling UK operations.
Soubry said that there is "no change" in the UK government's offer to take out up to a 25% equity stake in Tata's Welsh business in light of the Brexit vote. She said the UK government is still "positive" a buyer will be found for the company.
The value of UK sterling has fallen since the Brexit vote. Soubry said that while a low value British pound "can have a beneficial impact on exports" the cost of importing increases for businesses.
"Nowadays we rely on importing the very material from which we make steel, so it's a real mixed bag," Soubry said.