A new report has called on the government to clarify if it will support British firms if they are affected by an uneven playing field that could be created by a €5.3bn fund subsidising its Brexit-impacted industries.
If EU countries decide to use much of the new Brexit Adjustment Reserve funds to subsidise private businesses as expected, British firms could find themselves at a competitive disadvantage, the report from the European Scrutiny Committee warned.
The fund was set up to help Europe’s businesses adjust to the new processes and increased friction in trading with the UK.
The largest slices of the fund will go to the most exposed countries, with the nations nearest the UK set to benefit the most.
The Republic of Ireland alone will be handed €1bn (£860m), while fishing will be one of the industries targeted as a result of EU fishermen’s reduced access to UK waters.
France has already announced €100m (£86m) in support for its west coast fishermen and coastal communities from the fund.
Support provided by the UK Government has so far been sector specific, such as the £23m Seafood Disruption Support Scheme and £100m earmarked for fleet modernisation for the fishing industry, for which there is scant detail just yet.
Meanwhile, EU countries can spend money now on measures to support “regions, local communities, and sectors” most affected by the UK’s withdrawal, to help reduce related social and economic impact without having to submit spending plans. How the funds are spent will only be checked retrospectively by the European Commission in 2024.
Although the Government could potentially challenge the EU over Brexit Adjustment Reserve subsidies to individual businesses under the rules set in the trade deal, these powers are limited.
For example, the subsidies must have an impact on trade and investment flows between the UK and the EU. Neither the UK nor EU can prevent the other from subsidising businesses, but are able to take what could be mutually costly balancing measures like imposing tariffs.
Furthermore, fishery subsidies, the industry where much of the Reserve money is likely to end up, are completely outside the scope of the Trade and Cooperation Agreement.
The chairman of the European Scrutiny Committee, Sir William Cash, has written to Treasury minister Steve Barclay to clarify whether the Treasury has any concerns over the Reserve, how the fund’s effect will be monitored, and on the prospect of additional support for companies if impacted by it. He has asked for a response by the end of July.