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Brussels, 15th May 2009

State aid: Commission endorses temporary UK subsidised interest rates scheme to counter credit squeeze

The European Commission has authorised under EC Treaty rules on state aid a UK scheme aimed at relieving firms that encounter financial difficulties as a result of the credit squeeze in the current economic crisis. The measure allows national, regional and local authorities to grant aid in the form of reduced interest rates on loans of any duration concluded by 31 December 2010. The scheme meets the conditions of the Commission’s Temporary Framework for state aid measures, which gives Member States additional scope to facilitate access to financing in the present economic and financial crisis (see IP/08/1993). In particular, it is limited in time and only applies to companies that were not in difficulties on 1 July 2008. It is therefore compatible with Article 87(3)(b) of the EC Treaty, which permits aid to remedy a serious disturbance in the economy of a Member State.

Competition Commissioner Neelie Kroes said "The UK measure facilitates access to liquidity for firms affected by the current economic downturn, without causing undue distortions of competition. It offers a significant reduction in the cost of loans, which is an effective way of encouraging business investment and economic recovery."

The UK authorities designed the measure on the basis of the rules in the Temporary state aid framework (see IP/08/1993) that deal with aid in the form of subsidised interest rates. The low rates will be available for loans contracted no later than 31 December 2010, but only on interest payments up to 31 December 2012. After that date firms will have to pay market rates. The scheme does not apply to firms that were already in difficulty on 1 July 2008.

The scheme forms part of a wider set of measures authorised under the Temporary Framework for state aid in the UK (Small amounts of compatible aid, see IP/09/215, Temporary aid in the form of loan guarantees and Temporary aid for the production of green products, IP/09/333).

The non-confidential version of the decision will be made available under the case number N 257/2009 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

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