British negotiators will demand on Wednesday that the EU changes Northern Ireland Protocol subsidy rules so businesses can benefit from coronavirus state support.

The UK has to request EU authorisation for Covid support loans to Northern Ireland, which, under the Protocol, must be cleared by Brussels.

Government sources said the fact that the UK had to seek permission before distributing the emergency support underlined the need to change the treaty, which was signed in 2019.

A UK government source said, “It’s ridiculous that because of the Northern Ireland Protocol we’re forced to seek permission from the EU in order to give vital Covid support loans to businesses in our own country, especially given the pressures they are facing at the moment with omicron.

“This is exactly why we need to urgently agree to real changes to the Protocol.”

Insiders accused Brussels of being unwilling to negotiate on state aid but added they hoped that would change after the Christmas break.

Government sources have also pushed back against reports that the UK had dropped its demands that the European Court of Justice be stripped of its role in the Protocol.

The EU secured authorisation rights for state-aid handouts in Northern Ireland in talks over the Withdrawal Agreement, in what was meant to be a safeguard in the event of a no-deal Brexit.

It was designed to protect European businesses from a future UK government pumping state support into businesses in Northern Ireland.

Under Article 10, the UK must gain EU authorisation before offering state aid 

The province benefits from a unique dual access to the UK and EU market, but at the cost of imposing customs checks on British goods exported to Northern Ireland to prevent a hard Irish border.

Under Article 10 of the Protocol, the UK must gain EU authorisation before offering state aid to Northern Ireland.

The Protocol came into legal force when Brexit took effect at 11pm on Dec 31 2020.

Temporary “umbrella” notifications have been in force since April but, unless there is a breakthrough in Protocol talks,  the UK will have to ask the EU for permission for any state aid in Northern Ireland from next year.

The UK agreed to those conditions in talks over the Withdrawal Agreement in 2019, long before the pandemic and the surge in state support for businesses that followed.

There has been no suggestion that the European Commission could reject the request to give support to Northern Irish businesses.

Government sources said they would ensure that businesses in Northern Ireland were supported in the unlikely event Brussels blocked the subsidies.

They claimed that British and Northern Irish businesses would have to apply through different processes for Covid support loans, which was an unnecessary burden.

The UK would prefer that government subsidies in Northern Ireland were granted in accordance with the same rules as the rest of the UK.

Those would be  based around the shared principles agreed with the EU last year in the Brexit trade deal, rather than under direct EU supervision.

Lord Frost wants to simplify the state aid rules that apply to Northern Ireland, by importing the model agreed in the Trade and Cooperation Agreement (TCA)

The Brexit minister believes the rules are some of the most comprehensive subsidy controls of any global free-trade agreement.

The TCA sets out a series of commitments both sides have agreed to adhere to when handing out state aid but doesn’t require the same level of notification to the EU as demanded in Northern Ireland under the Protocol.

A source said: “These are not subsidies for giga factories flooding the EU with cheap goods, these are loans to keep businesses in Northern Ireland afloat during a global pandemic.”

A European Commission spokesman said he could not comment at this stage while negotiations continued.