State Aid is the use of national money to fund various projects, schemes or activities in the UK. All state aided schemes are subject to regulations laid down by the European Commission, in line with articles 107 and 108 of the Treaty functioning of the European Union (TFEU).

When a Member State provides financial aid to selected companies and organisations it may provide them with an advantage which distorts or interferes with the smooth running of the internal market.

State Aid is defined as “any aid granted by a member state or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain good and affects trade between member states”. This definition is the basis of the ‘4 Tests’ used to assess the presence of State Aid:

1. Is the measure (i.e. the form of support) being provided by the state or through state resources?
2. Does the measure favour particular undertakings or the production of certain goods?
3. Does the measure affect tradable activity between Member States?
4. Will the measure distort competition, or does it have the potential to distort competition.

If you want to fund a project that meets all of the four tests then you are required to obtain state aid clearance.

Who is responsible for State Aid?

Defra is responsible for state aid rules in the UK’s agricultural and fisheries sector. For other sectors please contact:

• Department for Business Innovation and Skills – for all sectors other than agriculture, fisheries, forestry and transport
• Department for Transport 
• The Forestry Commission

Further information

• Public money spend – the process
• What constitutes an agricultural product
• State Aid rules
• Contact your local state aid expert