IMPLEMENTATION LEVEL

National

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
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Inception date: 01 May 2009 | Removal date: open ended
Still in force

Interest payment subsidy

On 29 July 2009, the UK authorities notified an amendment to the existing scheme "Temporary aid in the form of subsidized interest rate" (N 257/2009). The proposed amendment provides selective assistance to firms operating in the housing construction sector. Prior to the credit crunch, a number banks invested heavily in the property sector including housing and now consider themselves over-exposed to the sector. The lack of availability of loan finance is reported to be one factor in the current slowdown in UK housing delivery. While banks try to reduce this exposure, the UK government seeks to maintain housing supply and employment in the construction sector.

The overall budget is estimated to be GBP 8 billion and the estimated number of beneficiaries under the amended scheme continues to be within the range of 101 to 500 undertakings.
 
The Commission approved the scheme "Temporary aid in the form of subsidized interest rate" (N 257/2009) by Commission Decision C(2009)3982 of 14 May 2009. In that approval decision the Commission first established that the notified measure constitutes state aid within the meaning of Article 87(1) of the EC Treaty and gave the following assessment:
 
"State resources are involved in the notified scheme since the subsidized loans are made available from State resources. The measure is selective since it will be granted only to a limited number of firms located in the United Kingdom. The measure confers an advantage by relieving the beneficiaries of costs which they would have to bear under normal market conditions since, without the intervention by the State, the borrowers would obtain loans only at higher costs, if at all. The favouring of certain undertakings means that competition is distorted or threatened to be distorted. The measure affects trade between Member States since the scheme is not limited to beneficiaries which are active in sectors where no intra-community trade exists." (par. 24-27 of the letter from the EC to the UK - Brussels, 14.05.2009 C(2009)3982 ).
 
The Commission then considered the scheme to be in conformity with the Temporary Framework and with the Treaty on the basis of Article 87(3)(b).
 
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.
 

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