aBrexit advocates Two contradictory visions of the British economy have intertwined. Thatcherite right figures envisioned a smaller state of low taxes and low subsidies. The Eurosceptic left had hoped to get rid of European UnionThe state aid rulebook would allow the government to support favored industries. Things are not going the way of Thatcher’s followers.
Brexit has coincided with a significant rise in the use of government aid for businesses, according to new analysis commissioned by… The Economist From the law firm Shearman & Sterling. In 2015, British government aid amounted to 0.35% of gross domestic productcompared to European Union-The overall average is 0.67%. This rose to 2.71% in Britain and 2.39% in the United States European Union In 2020, the Corona virus prompted rescue operations for distressed companies.
Spending has since fallen but to a level well above the pre-pandemic trend, at 1.19%. gross domestic product In 2021 and 1.13% of gross domestic product In 2022 (see chart). “We only have a few years’ data, but it appears that both… European Union “Britain has seen significant increases in support that are not explained by the pandemic alone,” says James Weber, a state aid lawyer at Shearman & Sterling.
Events have forced the government’s hand to some extent. Covid-19 was already spreading when Boris Johnson celebrated Britain’s official exit from the European Union European Union In January 2020. The invasion of Ukraine in 2022 required measures to alleviate energy shortages in Europe. Subsidies are popular everywhere; Promises by politicians in Europe and America to attract manufacturing jobs and reduce dependence on China are putting pressure for a response from Britain.
Determining how much the government spends is harder than it should be. Britain no longer exists European UnionThe “scoreboard” for annual aid does not produce statistics on its own use of government aid. Shearman & Sterling’s analysis is drawn from an online government database of support awards, which is outdated and lacks contextual information.
Two big-ticket items drove Britain’s spending higher in 2021 and 2022. These items include £22 billion ($28 billion) to be capitalized United kingdom Infrastructure Bank, a new state-owned development bank that aims to replicate the role of the European Investment Bank. The state also spent £3bn to bail out failed energy company BLP.
There will likely be more interference, whatever the outcome of the next election. Labor promised to emulate President Joe Biden’s industrial policy. It initially set out an annual grant to factories, steel mills and renewable energy companies of £28 billion per year (1.2% of GDP). gross domestic product), although the bleak state of public finances prompted it to scale back its ambitions.
Conservatives may decry support races on principle. In practice, they were willing to hand out money to keep Britain’s carmakers and steelworks. On November 22, the Treasury announced that it would allocate £4.5 billion over five years to support advanced manufacturers. Indeed, the post-Brexit system is designed to be permissive. In the European Union The committee must examine the largest subsidies before offering them. In Britain, the regulator’s advice to the government is non-binding; Cash prizes cannot be redeemed until after the fact has been adjudicated by a court. Historically, Britain has been a sparing user of government aid. It has become more European. ■