Brexit: DFID underwrites £90M of aid contracts at risk

LONDON — The United Kingdom government has agreed to underwrite an estimated £90 million ($117.2 million) worth of European Union aid contracts to avoid a funding cliff edge for U.K. NGOs in the event of a no-deal Brexit.

The commitment extends an earlier guarantee that applied to a more limited number of projects.

The EU’s humanitarian arm ECHO has long warned that existing contracts with U.K. groups risk being immediately cut off if the U.K. leaves the bloc without a deal. This would leave projects in limbo as some EU aid funding is reserved for groups headquartered within the EU or in lower-income countries. A no-deal Brexit would make U.K. groups ineligible.

There has been increasing concern about that scenario: With Brexit initially due to happen Friday, Prime Minister Theresa May is still without parliamentary support for her withdrawal deal. She has secured a short extension to April 12, but with no clear path forward.

To quell concerns and ensure that U.K. NGOs could bid for EU funding while negotiations continued, the Department for International Development announced last year it would underwrite some contracts — essentially agreeing to pick up the cost of the project if EU funding was cut off.

But NGOs were concerned that the guarantee only applied to EU contracts awarded after Aug. 23, 2018 — leaving many existing projects vulnerable.

Amid ongoing uncertainty, DFID has now extended that guarantee to cover any ECHO contract that is bid for before the new leaving date of April 12. It has also agreed to cover contracts that fall under the €30 billion ($33.7 billion) European Development Fund and €20 billion Development Cooperation Instrument, which are managed by the EU’s development arm, DEVCO. DEVCO has also been warning about the risk of a funding break but had not been covered by DFID’s earlier guarantee.

In a statement to parliament, Secretary of State for International Development Penny Mordaunt said the exact size of the liability was unknown as organizations continue to bid for new funding, but was estimated to be around £90 million.

She said the consequences of withholding the commitment “would be the halting or even cancellation of programs delivering vital aid ... to the world’s vulnerable, and the failure to uphold our commitment to U.K. humanitarian and development organisations.”

Claire Godfrey, head of policy and campaigns at the U.K. NGO network Bond, which had been campaigning for the change, said it marked “a significant win” for the U.K. aid sector.

“We have been calling out the risks of ‘no deal’ on the sector and the life-saving work NGOs do across the world for some time now,” she wrote in a statement to Devex. However, with an ongoing relationship with the EU on development work yet to be determined, she said the challenge will be to ensure that the poorest people are left no worse off than before Brexit, and have “greater opportunities to escape poverty.”  

“[T]he danger is not over yet and we must work to avoid any negative human consequences,” she added.

U.K. politicians were due Friday to vote again on part of the Brexit deal.

Update, April 1: This story was amended to clarify that Claire Godfrey is head of policy and campaigns at Bond.