Combined authority facing subsidy control challenge over £140m loan

Greater Manchester Combined Authority is to defend a challenge in the Competition Appeal Tribunal to its decision to loan £140m to a property developer, in what is thought to be the second-ever subsidy control challenge under the Subsidy Control Act 2022.

The proceedings concern two £70m loans handed to companies owned and controlled by Renaker Group, a Manchester-based developer.

The combined authority lent the money to fund high-quality housing in the city, but the appellant argues that the decision constituted a subsidy and "distorted" the city's property market.   

A combined authority report on the payments said the loans would help supply new, high-quality housing required for Greater Manchester to realise its full economic potential, sustain a significant number of jobs within the construction sector, and provide opportunities for apprenticeships in construction trades.

However, in a notice of appeal, the appellant, Aubrey Weis, owner of Weis Group, argued that the payments: "Would not have been granted by a commercial operator and / or have been concluded on non-market terms and they have been made to further the Respondent's public policy objectives and functions, thereby constituting a subsidy as defined in section 2(1) of the [2022 Act]."

In addition, the council's report does not refer to any consideration of the requirements of the 2022 Act, Weis claimed.

In his notice of appeal, Weis raised concerns that the loans "distorted the operation of the market" for property investment and development services in the city, and enabled the recipients to undertake projects they could not otherwise perform, providing them with a competitive advantage.

He also argued that the combined authority has already provided extensive financial support to Renaker, that it has failed to consider its aggregate level of exposure to Renaker, and that the Renaker entities pay the Respondent less than a market interest rate on the loans.

By way of relief, Weis has requested a declaration that the combined authority has granted a subsidy to the two recipients, alongside an order prohibiting the combined authority from continuing to provide subsidies to the two recipients, "or quashing such arrangements to the extent that they may have been entered into prior to the determination of these proceedings".

He is also seeking costs.

Joseph Barrett KC of 11KBW is appearing in the case.

In a statement, the set said the appeal "is likely to provide important guidance on the nature of the duties which the 2022 Act impose upon public bodies granting loans or other forms of financial support or assistance to private sector operators".

Commenting on the case on LinkedIn, Oliver Slater, a subsidy control and procurement specialist at Sharpe Pritchard, said: "Contacts at public authorities will be interested to see how this one develops. It regards the tricky issue of loans: when are they subsidies and how does one determine what constitutes commercial terms / market interest rates?

"Clarity from the CAT on these questions and others would be very welcome. We'll see how the case develops."

A spokesperson for the Greater Manchester Combined Authority (GMCA) said: “We are aware of a claim submitted to the Competition Appeals Tribunal regarding the Greater Manchester Housing Investment Loans Fund.

“The Housing Investment Loans Fund was set up in 2015 with £300m of Government funding. Loans through the Fund are repaid to the GMCA and recycled, helping to maximise the impact and support the delivery of Greater Manchester’s housing priorities.

“The GMCA has been delivering investment loans from the Fund to a wide range of developers in the years since and we are confident in our processes.

“We refute any suggestion that these loans are given at less than market rate or on preferential terms, and will be submitting our response to the Competition Appeals Tribunal.”

Renaker has been approached for comment.

Adam Carey