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Regional Aid

Regional Aid and Assisted Areas

Purpose of Regional Aid?

Regional state aid aims at promoting the development of disadvantaged regions in Europe by supporting private productive investment or, in limited cases, by providing operating aid. The regional aid guidelines (RAG) set the rules under which Member States (MS) can grant state aid to support regional economic development. They also set out the rules for drawing up regional aid maps that define in which areas companies can receive regional state aid and at what intensity. The aim is a stronger overall single market, with all European regions able to compete and take part.

 

Where can regional aid be offered?

This aid is largely aimed at providing support to Small and Medium sized Enterprises (SMEs) in the form of financial incentives for businesses to invest in marginal locations so that jobs are created in these disadvantaged areas, and local GDP increased over the long term.

The guidelines also set the rules for selecting the areas in which this support is available, known as ‘Assisted Areas’ in the UK. The criterion for selection of an Area is based upon the Average Gross Domestic Product per Capita across all EU member States.

 

  1. Areas with less than 75% of the average EU GDP per capita are considered most disadvantaged, and are automatically designated as 107(3)a areas, or ‘A areas’, named after the EU Treaty article which permits enhanced aid.
  2. Areas with long-standing or permanent difficulties, such low population densities, transition from former ‘A region’ status, or island geography are also automatically selected for the sparsely populated ‘C area’ status.
  3. Member states are then allocated a population envelope which they can use to cover other ‘C areas’ which are disadvantaged compared to the national average – either lower GDP or higher unemployment.

 

As the relative picture of disadvantage changes across the EU, so does the logic for designating some areas and not others.

For example, the EU expansion to the East in 2004 and 2007 considerably lowered the average GDP levels. These new EU countries were considered to be not as economically advanced as older EU member states. Many areas which used to be relatively disadvantaged are now, with the shift of the average, considered to be relatively economically advantaged.

For the 2014-20 map, Scotland is able to cover approximately 41% of its population through the selected Assisted Areas. these are targeted on the areas which need the development support the most; but where it is also realistic to expect businesses to be interested in investing.

 

The UK assisted areas map outlines the assisted areas for Scotland. No location in Scotland falls under an ‘A’ area. The Western Isles and large parts of the highlands and Islands are defined as sparsely populated c areas, and several other parts of rural and urban Scotland fall under other c area status.

 

How much aid can be offered in Scotland:

The amount of aid which can be offered depends on both the size of company and the type of Assisted Area. In Scotland, the following rates apply:

 

Table 1: Regional aid intensities by location and beneficiary size[1]

Size of beneficiary

Sparsely populated C areas

Other C Areas

Large

15%

10%

Medium

25%

20%

Small

35%

30%

 

This support is very actively used in Scotland. For example,  organisations applied for support from Scottish Enterprise under their Regional Selective Assistance scheme. This scheme had an annual spend of £29.78m in 2013. This can be broken down to 118 offers of grants being awarded to both SME’s and large enterprises. With the help of this scheme 4,766 Scottish Jobs were created or safeguarded.

Under the new guidelines, support for similar activities can still be given under Scottish Enterprise scheme – ‘SE Regional and SME investment aid Scheme’. However, aid is much more restricted to large enterprises, who may only benefit if the activity is in favour of new economic activity in an area or a significant diversification of activity, and does not involve moving a similar activity from another area of the European Economic Area.

 

Regional Aid Guidelines 2014-2020

The 2014-2020 Regional Aid Guidelines have been in force since 1 July 2014. The UK assisted areas map by the UK government was approved by the commission and outlines which areas in Scotland fall under which category. You can also use this map to do a Postcode search to see if the applicants project location falls within an assisted area.

Support for regional aid falls under two separate pieces of State Aid regulation: the Regional Aid Guidelines themselves, and the general Block Exemption Rules.

 

  • The General Block Exemption Regulation (GBER) provides cover for Regional Aid under articles 13-16 and should be used where possible in the first instance by notifying schemes. It includes not only aid for investments in tangible and intangible assets, but also aid for the additional transport costs of goods produced in sparsely populated areas, and aid for regional urban development co-financed by European Structural and Investment Funds. But it does not cover:
    •  aid to large firms for in situ expansion of existing activities
    •  aid for shipbuilding, transport, coal, steel, and energy.

 

  • The Regional Aid Guidelines can be used if a scheme or ad hoc award does not fit within the GBER thresholds.

 

Should you wish to discuss this further please contact the State Aid unit.

 

[1] Enterprise size categories as defined in Annex 1 of the General Block Exemption Regulation