Subsidy Control Assessments: Key takeaways from recent SAU reports
The Subsidy Advice Unit (SAU) is the reporting function of the CMA for the purpose of reporting on subsidy control assessments that have been referred to the SAU. In this article we summarise the guidance within recent reports, for practitioners to consider when drafting subsidy assessments.
Issues covered include recommendations for:
Explaining the value of the grant against the proportionality Principle B
Setting out assumptions and modelling approaches used in determining the conclusion reached under Principle C
How an authority might address and explain why compensating for costs that have already been incurred is compliant with Principle D
The Subsidy Control Act 2022 (SCA) at Schedule 1 sets out 7 Subsidy Control Principles and the related Statutory Guidance details how to address these Principles within a subsidy control assessment.
Section 59 of the SCA provides for an evaluation of a public authority’s’ subsidy control assessment once it has been referred to the Competition and Markets Authority (CMA) further, the evaluation report may include advice on how the subsidy control assessment might be improved. This function of the CMA is completed by the Subsidy Advice Unit which is part of the CMA.
In recent reports out in April and May 2026 the SAU has provided guidance addressing how those subsidy control assessments could be improved. This guidance which may assist when drafting future subsidy control assessments, is summarised below:
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• Principle A can address either a Market Failure or an Equity Objective. The SAU noted some reports which focused on one element and made a cursory reference to the other, while they recognised only one needed to be addressed, they recommended that if both are referred to in an assessment, then both should be fully addressed against each Principle
• When referring to Market Failures to consider and capture in the report the Externalities requirements covered in para 3.37-3.41* of the Statutory Guidance (*version Aug 2025)
• Strategic or general references are to be avoided and to clearly identify Market Failure or Equity Objectives and describe and evidence them in line with the Statutory Guidance
• For this Principle much of the SAU guidance focused on providing further detail and explanation to outline in depth why the subsidy is considered the minimum necessary, detail any negotiation, level of due diligence conducted
• Explain how the grant figure was determined and why this was proportionate by demonstrating why a lower figure or partial repayment would be insufficient
• Set out processes which verify how costs were the minimum necessary
• Fully explain how the analysis of the necessary subsidy level was conducted, including details on how any information from the Recipient was scrutinised in determining the subsidy amount
• As with Principle B the SAU guidance focused on providing clearer and specific detail to explain in both the shorter and longer term, what is considered to be the most likely outcome in the absence of the Subsidy
• Where data analysis is used as the basis for a decision then to explain how the conclusion was determined by detailing and setting out any assumptions made and the modelling approach used, in forming the conclusion and making the decision
• The SAU guidance helpfully explained how to address under this Principle costs that have already been incurred and how they may still be compliant with this Principle and be accounted for within the Subsidy. The guidance set out this could be achieved by explaining why the project would not go ahead without the subsidy and note any funding already incurred towards completion. Then to consider how discussions on the subsidy have impacted the recipient’s decision to begin incurring costs. As part of that assessment to define any costs considered outside of “business as usual” costs and why those costs satisfy the additionality test under Principle D
• The SAU acknowledged the report had addressed other subsidy alternatives under this Principle however, recommended the assessment goes further and explain why other non-subsidy options (such as commercial loans or equity investments) were not considered appropriate to achieve the policy objective in the current market context
• The SAU addressed a scenario where an existing subsidy may benefit the recipient with competitive dominance in the market prior to a future procurement. Here the SAU recommended to address within the assessment whether the subsidy gives a recipient any competitive benefits to enhance its position ahead of any future procurement
• Under this Principle the SAU guidance on another report noted the assessment should consider and include details on the scale of the scheme relative to the overall size of the market (for example in percentage terms)
• The SAU gave guidance in most reports against this Principle some of which is likely to be particular to individual circumstances such as guidance to consider and address the geographical and distributional impacts of co-location (if applicable) and wider effects (positive or negative) for business in the area
• Other SAU guidance was more general and of benefit to all subsidy control assessments such as ensuring the balancing exercise is linked to the objectives in principle A
• To differentiate between the direct benefits of the subsidy and any longer term benefits it may enable
• To identify the negative impacts of giving the subsidy, rather than the negative impacts of the ‘do nothing’ scenario
Awareness of the SAU guidance within their evaluation reports can assist public authorities planning subsidy decisions and the value of the grant. Awareness will also assist those drafting the subsidy control assessments to ensure appropriate factors under the subsidy principles, have been considered and can be detailed and evidenced to mitigate any challenge to the grant award.
For further advice on subsidy control assessments for your organisation or for a review of proposed grant decisions or your grant-making processes, contact our Public Sector team.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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