UK organizations likely to face funding shortfall after Brexit

U.K. organizations are likely to face funding shortfall after Brexit. Photo by: Peter Linke

The United Kingdom’s exit from the European Union will likely leave U.K.-based development organizations with significant funding gaps, particularly for those working in EU-priority countries and humanitarian organizations, two new reports from Bond, the U.K. NGO network, reveal.

U.K. organizations received 356 million euros in 2016 through the EU — 205 million euros of which came through the bloc’s humanitarian aid arm, known as Directorate-General for European Civil Protection and Humanitarian Aid Operations. The amount is significantly more than Bond’s earlier estimate for 2015.

The report released today indicates that most or all of this funding will be at risk with the onset of Brexit, potentially resulting in a loss of funding for U.K. organizations working in 61 countries, including 28 countries prioritized by the U.K. Department for International Development as fragile states.

The extent of the loss will depend in part on whether the U.K. government continues to contribute to EU aid instruments, many of which have performed well in U.K. government metrics. In addition, although EU funding prioritizes EU-based organizations, non-EU groups are sometimes eligible to bid.

The reports highlight ambiguity over the position of U.K. organizations under the existing rules after Brexit and over how much leverage the sector will have in negotiating access to the new ECHO framework partnership agreements for 2019-2021.

“The biggest impact is likely to be felt by small to medium-sized organizations that have high levels of dependence on EU grants, as well as larger NGOs that receive humanitarian funding,” Tamsyn Barton, CEO of Bond, said in an email.

“The U.K. government should aim to secure their continued participation in selected development and humanitarian programs, which may mean reforming some funding instruments to allow for co-financing from non-EU countries, including the U.K.,” she said.

Aid organizations have already begun to feel the impact of Brexit, as currency devaluation and fluctuation hampers programs in-country.

EU funding streams: Rules and loopholes

Non-EU organizations are eligible to bid for EU development programing in some instances.

For example, the Development Cooperation Instrument — which funds development in Asia, Latin America, the Middle East (east of Jordan) and South Africa — accounted for 55 percent of all grants flowing from the EU to U.K. organizations in 2016. Organizations from non-EU OECD countries are eligible if they are working in the least developed countries or in heavily indebted low-income countries.

DCI also maintains reciprocity rules for access, meaning if the U.K. agrees to open its funding instruments to aid organizations based in the EU, U.K. organizations could maintain access to EU instruments.

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The European Development Fund — the EU’s largest aid instrument, focused on poverty reduction in countries in Africa, the Caribbean and the Pacific — provided 34 million euros to U.K. aid organizations in 2016. Again, organizations from non-EU OECD countries are eligible for projects to be implemented in LDCs and heavily indebted poor countries.

Over half of EDF recipient countries are members of the British Commonwealth — a group of former territories of the British empire — and terms for U.K. funding will likely be determined in the early stages of the Brexit negotiations, the Bond reports note. The U.K. has already contributed to the fund for the period ending in 2020, and the EU is due to issue calls for contributions for the 2021-2027 period shortly.

Because the EDF is separate from the normal EU aid cooperation budget, and is based on voluntary contributions from EU countries, the authors speculate that there “may be a case” for the U.K. to negotiate continued contributions.

Humanitarian funding through ECHO

However, ECHO — which channeled a staggering 210 million euros through U.K. aid organizations in 2016 — is restricted to organizations registered in an EU or European Economic Area member state.

It is also open to organizations recognized in an EU member state through the Council of Europe Convention No. 124 of April 1986, but this has so far seen only two organizations — from Switzerland and Macedonia — receiving grants.

ECHO also requires all eligible organizations to be headquartered in an EU country or ECHO-recipient country for three years before receiving a grant.

EU trust funds

Finally, the U.K. contributes to a number of controversial EU trust funds, for example, the EU Emergency Trust Fund for Africa. Trust funds now account for 2.3 billion euros of financing from the EU budgets, EDF and EU member state contributions. Access to these funds varies; the Bêkou Fund, for example, is entirely open. Bond’s research found that humanitarian-focused U.K. aid organizations are looking increasingly to these instruments as a promising source of funding, although they have so far mostly benefited larger organizations.

Encouragingly, Stefano Manservisi, the European Commission director general for development, has expressed a desire to reach out more to non-EU actors in an effort to untie EU aid going forward, meaning U.K. aid organizations (and others) could access more of the funds without geographic eligibility requirements.

For more U.K. news, views and analysis visit the Future of DFID series page, follow @devex on Twitter and tweet using the hashtag #FutureofDFID.

About the author

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    Molly Anders

    Molly Anders is a U.K. Correspondent for Devex. Based in London, she reports on development finance trends with a focus on British and European institutions. She is especially interested in evidence-based development and women’s economic empowerment, as well as innovative financing for the protection of migrants and refugees. Molly is a former Fulbright Scholar and studied Arabic in Syria, Jordan, Egypt and Morocco.