Government increases State Aid cap

04-Mar-2021 - Last updated on 05-Mar-2021 at 09:02 GMT

Related tags state aid Budget Government Coronavirus

The State Aid cap has been increased to more than £10m, giving larger hospitality businesses greater access to Government-backed grant schemes.

Paul Scully, the Minister for Small Business, Consumers and Labour Markets, confirmed on Twitter this afternoon (4 March) that the cap on the amount of grant support firms are able to claim would be raised from £3.5m to £10.9m.

He said: "We continue to back businesses of all sizes through the pandemic and I’m delighted to see the cap on Covid-19 support grants raised to £10.9m.

"Extending our support will help retail and hospitality chains and the thousands of staff they employ."

The cap is a legacy of the UK’s participation in the EU State Aid scheme pre-Brexit, which controlled the way governments could dish out subsidies to companies.

Having now left the EU, the UK has set out plans for a new State Aid regime, but has so far largely retained rules inherited from Brussels.

Last year sector trade bodies warned that 20,000 hospitality businesses would miss out on lockdown grants unless the Government took steps to reform State Aid rules.

The announcement of the raised cap follows yesterday's (3 March) Budget, in which Chancellor Rishi Sunak confirmed the introduction of a new £5bn 'restart' grant scheme that will give hospitality businesses access to one-off payments worth up to £18,000 on a per property basis.

Allocation of the grants will be based on the value of a property.

Properties with a rateable value of £15,000 or under will receive £8,000; those with a rateable value between £15,000 and £51,000 will get £12,000; and businesses with properties that have a rateable value of £51,000 or over will be entitled to £18,000.

Calls for a scrap or raise in State Aid limits were reignited following the announcement of the 'restart' grant scheme, with several sector leaders including Greene King chief executive Nick Mackenzie and Mitchells & Butlers CEO Phil Urban highlighting the plight of larger businesses unable to access sufficient support.

Mackenzie demanded the Government to 'urgently clarify' whether funds would be affected by State Aid, whilst Urban spoke of the frustration of many businesses who were continuing to suffer because of the cap post-Brexit.

“The irony is not lost on us that we were capped within Europe,” he said.

“Then when we leave, they choose to keep us in the State Aid cap. Meanwhile, Europe increased their state aid to £10m, or €12m.”