Despite being one of the remotest parts of the European Union, Shetland will be excluded from automatic classification as an assisted area under recently adopted EU regional aid guidelines.
The move is as a result of the Shetland’s gross domestic product (GDP) being above the EU average, and its current low level of unemployment.
The European Commission’s rationale for the ruling, which comes into force from July 2014, is to prevent distortions of trade and unfair competition within the EU.
Shetland Islands Council has expressed disappointment at the decision as, following publication of the draft guidelines earlier this year, it had embarked on an intensive lobbying campaign at all levels of government.
That included meeting directly with the cabinet of the EU competition commissioner responsible for regional aid in an effort to stress the need for public agencies, such as the SIC, to continue to have the powers to provide financial support for business investment.
Political leader Gary Robinson said: “We took Shetland’s case to the highest level and explained the economic development challenges associated with operating businesses in peripheral and geographically challenged areas.
“We explained how the council, over the past decades, has used its resources under regional aid to support business investment and create jobs in remote areas where there are limited employment opportunities.
“It was stressed to the Commission officials that using criteria such as GDP and unemployment rates does not take account of economic realities of operating business in the periphery.
“However, we’d like to acknowledge the support of our Highlands and Islands partners, Scottish MSPs and MEPs, our MP, both Scottish and UK governments, UKRep and the Conference of Peripheral Maritime Regions (CPMR), all of whom backed our cause.
“We’ll continue to make the case to the EU for better acknowledgement of the geographic challenges of remote island communities and the need to take account of factors such as distance from mainland markets, all of which add to the high cost of living and operating a business in Shetland.”
Isles MSP Tavish Scott said he was “very disappointed that Europe doesn’t recognise the distance from markets that Shetland businesses face”.
“The islands are on the periphery of the periphery and yet, astonishingly, Shetland doesn’t qualify for European Regional Aid. I will work with the SIC in exploring the potential for reversing this decision as these funds have played an important part in building the Shetland economy in the past.”
Jean-Didier Hache from the CPMR said: “The CPMR Islands Commission has repeatedly drawn the attention of the EU institutions to the fact that allowing more flexible state aid rules in islands, especially in small island regions such as Shetland, was not going to disturb the functioning of the internal market.
“The dogmatic, not to say autistic attitude of the Commission on that matter will contribute in no small way to comfort the views of those who like to depict the Brussels authorities as an insensitive bureaucracy, and this is most regrettable.”
While Shetland is not automatically classified as an assisted area by the EU, the council will now work in close collaboration with the Scottish and UK governments to influence the UK regional aid map, and to identify alternatives to regional aid.
The guidelines relate specifically to public financial support for business investment and do not apply in the agriculture, fisheries and aquaculture, and transport sectors. Nor do they impact on the ability of public agencies, such as the council, to provide support for R&D and training.
Shetland still remains eligible to receive EU funding as part of the Highlands and Islands transitional area for structural funds for 2014-20 and many of the other EU-wide programmes which will come on stream from 2014 onwards.