NI Businesses Applying For Covid Recovery Loans Must Adhere To EU Subsidy Rules

Firms in Northern Ireland can apply for loans through the Government backed Recovery Loan Scheme, however, because the country is still in the EU single market for goods they will have to adhere to EU subsidy rules when applying for such a loan.

The Government Guarantees 80% Of The Loan

Here are details of this ruling as copied from an article on the BBC News website:

`Under the Recovery Loan Scheme (RLS) UK firms can borrow between £25,001 and £10m.

`The money will be lent by banks with the government guaranteeing 80% of the loan.

`The terms of the NI Protocol mean Northern Ireland is still in the EU single market for goods and so is still subject to EU subsidy rules for trade in goods. This mostly affects manufacturers.

`It means that firms in Northern Ireland applying for the RLS will have to comply with what is known as the EU’s Undertaking in Difficultly (UID) test.

`These are EU rules setting out the circumstances in which state support can be given to a firm which is in financial trouble.

Previous Schemes Were Covered By The UID Test

`Previous UK Covid loan schemes were covered by the UID test because they were introduced during the Brexit transition period.

`The Recovery Loan Scheme will have a UK version of a UID test, but it will be simpler than the EU rules.

`For example, only GB businesses in collective insolvency proceedings (with the exception of businesses that have entered into a Company Voluntary Arrangement since 16 March 2020) will be excluded from the RLS.

`The Recovery Loan Scheme also has the potential to act as a test of one of the most controversial elements of the NI Protocol – the extent to which EU subsidy rules will apply to GB businesses.

`This is covered by Article 10 of the protocol which essentially says the UK as a whole has to follow EU rules if a UK-wide subsidy could have an impact on trade in goods between Northern Ireland and the European Union.

This is not an ideal scenario as outlined above, but it is what firms will have to comply with as things stand unless a change in the regulations is introduced further on down the line.

If you require any help or guidance regarding this loan scheme or any other type of funding for your business please give our offices a call on 028 3752 2909 and we will be glad to advise you.