State Aid
EU rules strictly prohibit most instances of financial support from Government to failing or threatened industries. These rules are known as ‘State Aid rules.’
The UK will be a member of the EU until negotiations have been finalised so currently and until the formal exit, State Aid rules will still apply.
After the UK exits the EU, the extent to which State Aid rules will apply to the UK depends on the nature of the relationship with the EU that is negotiated. If the UK became a member of the European Economic Area (EEA), like Norway, then State Aid rules would still apply since they are broadly replicated in the EEA agreement.
If the UK negotiated a unique trade deal with the EU, then the likelihood is that some form of State Aid rules would still apply since the EU would probably require some form of state aid control.
If the UK were to leave without entering into any formal relationship with the EU, then theoretically, no form of State Aid controls would apply to the UK Government, and it would be free to provide any assistance to industries. However, various factors mean that the UK Government would be unlikely to begin subsidising failing industries:
• The UK has historically been averse to providing direct financial support to failing industries
• The UK would likely remain a member of the World Trade Organisation (WTO) following Brexit, and the WTO Agreement on Subsidies and Countervailing Measures restricts the use of subsides, although less stringently than the EU State Aid rules.
Trade
Many UK industries rely on trade with EU and non-EU member states. Whilst the UK is a member of the EU, trade deals are negotiated at EU level by the European Commission, meaning that trade negotiations have not formed part of the UK’s industrial strategy for many years.
The precise nature of the trade relationship with the EU following the UK’s exit will determine whether the current tariff-free trading relationship with other EU members will be replicated.
Regarding trade with non-EU members, the UK will likely be able to negotiate new trade deals after leaving the EU. This might mean setting its own tariffs and other regulations.
The only scenario following Brexit where the UK would not have the power to set its own external trade policy would be if it stayed within the EU Customs Union, like Turkey. It is unlikely the UK Government would see this as a desirable outcome following Brexit.
Labour market
2.2 million EU nationals work in the UK, meaning that the implications of Brexit on the free movement of people between the EU and the UK could have an impact on the workforce of many UK industries.
It has been widely suggested that whatever arrangement is put in place post-Brexit, the rights of people already exercising free movement would be protected (that is, EU nationals working in the UK and UK nations working in the EU would continue to have the right to do so).
However, for EU nationals wishing to begin work in the UK post-Brexit, their rights depend on the arrangement agreed during the negotiation process. In the February 2016 White Paper on The process for withdrawing from the EU, the UK Government stated that “there would be no requirement under EU law for” the right to free movement to be maintained in the event of Brexit.
