UK scraps EU cap on Covid grants for struggling businesses

Ministers are set to triple the cap on the size of Covid-19 grants companies can access after criticism that the UK government was still following EU state-aid rules months after the Brexit transition period ended.

Some large companies, including high street retailers, complained they had been locked out of the £4.6bn emergency coronavirus grant scheme announced in January because the UK was still applying temporary EU measures.

Last year, while still subject to the Brexit transition period that expired at the end of December, the UK government signed up to the European Commission’s “state-aid temporary framework” that limited individual companies from receiving more than €4m each in grants to deal with the Covid-19 crisis.

That meant that some larger companies had already reached the limits of grants they could accept by the time the new £4.6bn scheme was announced by the UK government to help businesses through the third lockdown.

The discovery they were still bound by the EU limits left many businesses bemused and angry given that the UK had left the bloc.

On Thursday, the government said it would remove the EU cap and replace it with a higher limit of £10.9m. Ministers informed councils of the new “Covid-19 business grant special allowance” that would be aimed at up to 600 larger national companies with multiple properties, which combined employ 230,000 people.

“Extending our support will help retail and hospitality chains and the thousands of staff they employ,” said business minister Paul Scully.

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At the same time, the government has said it will introduce additional tests to ensure that it does not risk taxpayers’ money by providing money to “ailing companies”.

Dominic Curran, property policy adviser at the British Retail Consortium, said that raising the state aid caps will unlock “funding for retailers who have been closed for months on end”.

He added: “Government grants for closed businesses provide essential funding to help tide retailers over during the multiple lockdowns. Without this, many businesses would not be able to survive, resulting in shuttered shops and job losses.” But he warned that some retailers would still run up against the new upper limit.

Critics had been confused by the continued adherence to the €4m cap given that the UK government’s own revised guidance confirmed that EU state aid rules no longer applied to UK subsidies after Brexit.

The situation arose because officials took the view that until a new UK state aid framework is set out then ministers should follow existing EU guidance.

Rishi Sunak, the chancellor, used his Budget on Wednesday to confirm an extension of a wider package of measures to help business through the Covid-19 crisis. The furlough scheme will be extended until September while relief on business rates will also continue until the summer.