Preparing for a no-deal Brexit: EU funding

On 23 August the UK Government began publishing technical notes on the effect of a no-deal Brexit. These notes are intended to provide guidance to citizens, businesses, public sector bodies and Non-Government Organisations in the United Kingdom on how to prepare for the possibility of the UK leaving the EU next March without concluding a Withdrawal Agreement. It is expected that around eighty technical notes will be published in total. Over the next two months SPICe Spotlight will provide analysis and comparative information on a number of these. The first blog provided an overview of the UK Government’s Preparations for a no-deal Brexit.

A “no-deal” Brexit would see an abrupt end to European Union funding programmes in Scotland. This blogpost analyses the UK Government’s no-deal technical notices on EU funding to summarise what leaving the EU without a deal means for access to funding, and the UK Government’s guarantees designed to operate in this scenario.

A full SPICe briefing on European Union funding in Scotland is also available.

EU budgets: give and take

All Member States make contributions to and receive funding from the European Union budget. This process is currently governed by a seven-year agreement called the 2014-2020 Multi-annual Financial Framework.

The UK makes a net contribution, though this framework, to the EU Budget. The notional net contribution from the Scottish public sector is roughly £450 million per year or 0.6% of total public-sector expenditure in Scotland (Government Expenditure and Revenue Scotland 2017-18). This calculation does not include private sector receipts, such as research funding for universities or loans from the European Investment Bank for commercial projects.

Funding available to Scotland

Funds received from the EU Budget are of broadly two types: pre-allocated or competitive. The major EU funding sources in Scotland are summarised in the infographic below.

SPICe_2018_International_EU Funding_Infographic value

Access to funds after Brexit

A “transition period” is proposed by UK and EU negotiators which would see the UK continue to make contributions to and receive funding from the EU Budget until 31 December 2020. This date is chosen because it is when the current Financial Framework, and therefore the current funding programmes, ends.

In a “no-deal” scenario, the UK would leave the EU on 29 March 2019 and see an abrupt end to EU funded programmes in Scotland because:

  • Only EU Member States can participate in the CAP and its payment schemes. The UK would therefore no longer have access to EU funds for direct farm support.
  • European Structural and Investment (ESI) funds, for economic, regional and rural development, are awarded in the form of grants for projects. The UK Government’s technical notes on the European Regional Development Fund, the European Social Fund and the EU Rural Development Programmes indicate that UK organisations would be unable to access ESI funding from the EU after exit day.
  • UK organisations would no longer have access to bid for competitive funds from the EU without further action.

UK Treasury guarantees

In 2016, the Treasury issued its first guarantees to underwrite projects who secured EU funding before 29 March 2019. These guarantees have been superseded by an announcement made just before the UK Parliament’s 2018 summer recess. The overview technical note on funding states:

“In July 2018, the Chief Secretary laid a Written Ministerial Statement (HCWS926) extending this guarantee to provide further stability for UK organisations in a ‘no-deal’ scenario. The guarantee now covers the following:

  • the full 2014-20 Multiannual Financial Framework allocation for structural and investment funds
  • the payment of awards where UK organisations successfully bid directly to the European Commission on a competitive basis while we remain in the EU
  • the payment of awards under successful bids where UK organisations are able to participate as a third country in competitive grant programmes from Exit day until the end of 2020
  • the current level of agricultural funding under CAP Pillar 1 until 2020.

For awards where UK organisations successfully bid directly to the European Commission on a competitive basis, we will work with the Commission to ensure that UK organisations will be able to continue to participate.”

Implementing the guarantee in Scotland

Farm support: the technical note on farm payments says that the devolved administrations are preparing domestic legislation which largely replicates EU law on the CAP to ensure farm payments continue in a ‘no deal’ scenario. On funding levels, the note says that the UK government has “pledged to continue to commit the same cash total in funds for farm support until the end of this parliament, expected in 2022”. See the SPICe Spotlight blog on Preparing for a no-deal Brexit: Agricultural Policy and Funding for more detail.

Structural and investment funds: the Scottish Government is the Managing Authority for most of the structural and investment funds. The technical notes on ERDF, ESF and EAFRD indicate that the Scottish Government would continue in a similar management role and “continue to sign new projects after EU exit until programme closure”.

Competitive funds: technical notes have been published on Horizon 2020, Erasmus+, European Territorial Cooperation, Connecting Europe Facility energy funding, humanitarian aid, LIFE, nuclear research and satellites & space programmes. The implications of a “no-deal” scenario on Scottish projects’ access to each fund varies; but, in general, access to these funds will either stop or only be possible with some form of access agreement at a UK-EU level. The Treasury guarantee covers payments for all projects already agreed but the technical notes do not contain much detail on the administration of these payments.

The following flowchart illustrates what will likely happen to EU funding in Scotland after Brexit showing two scenarios:

  • The UK leaves the EU with a finalised Withdrawal Agreement meaning a period of transition to the end of 2020 begins, or;
  • The UK leaves the EU with no-deal meaning the EU funding programmes will end in Scotland.

SPICe_2018_International_EU Funding_Infographic map

More information

More detailed information on European Union funding in Scotland is contained in the SPICe briefing European Union funding in Scotland.

Iain Thom
SPICe Research