What's at stake for aid in the Brexit deal?

British and European Union flags in front of the Berlaymont building that houses the headquarters of the European Commission in Brussels, Belgium. Photo by: European Union

LONDON — After more than two years of negotiations, the United Kingdom government finally put forward a draft Brexit agreement on Wednesday, which now goes to parliament for a vote. While aid spending hasn’t been top of the list of negotiation priorities, experts have been watching closely to understand what the deal could mean for the U.K.’s future relationship with the European Union on aid.

The U.K. is the continent’s second-largest aid donor overall, and the third-largest contributor to the EU aid budget. It delivered £1.5 billion ($1.93 billion) of official development assistance through EU instruments in 2016, accounting for about 15 percent of the EU’s aid budget and 11 percent of the U.K.’s.

From the impact on procurement and funding, to U.K. influence on European development policy, Devex finds out what’s at stake for aid in the Brexit deal.

Financial contributions

One of the big questions has been whether the U.K. could continue channeling aid funds through EU mechanisms after Brexit. It currently contributes to various instruments, with two-thirds of the £1.5 billion going through the official EU budget and a third through the European Development Fund, which sits outside the budget and is dedicated to development cooperation with countries in Africa, the Caribbean, and the Pacific.

Read in depth: Can the UK contribute to EU aid funds after Brexit?

The United Kingdom currently spends more than 10 percent of its aid budget through the European Union — but what happens after Brexit?

The U.K. has agreed to keep funding EDF until 2020, when its current funding cycle runs out. Other rolling commitments mean that, overall, the country is expecting to pay up to £4 billion of ODA into EU coffers over the next few years, according to Secretary of State for International Development Penny Mordaunt.

What happens post-2020 is less clear.

The U.K. Department for International Development seems to support continued collaboration with the EU, but has said that must include influence and oversight over any funds it contributes. There is some precedent for this: Norway, for example, has contributed to some EU aid projects in the past. At the same time, however, a proposed overhaul of the EU’s aid budget from 2021 — which will likely close off most of its aid instruments to nonmember states — will make such collaboration more difficult.

“DFID is keen to engage with the EU in some way … but ... the windows are closing quite rapidly in terms of the channels they could use to spend the money,” said Mikaela Gavas, visiting fellow at the Center for Global Development Europe.

If the £1.5 billion can no longer go through the EU, the U.K. will have to decide how to spend it through other bilateral and multilateral channels, with Mordaunt saying this will give the country “more flexibility to consider how we use our aid budget.”

Protecting UK entities

Another key issue is whether U.K. NGOs and contractors can continue to bid on EU aid contracts post-Brexit. The bloc’s humanitarian arm, ECHO, and development arm, DEVCO, collectively spend billions of euros in aid each year; and in 2016, about 25 percent of ECHO funding to civil society groups was granted to U.K.-based organizations, according to a report by international development network Bond

But with the exception of projects delivered in least-developed or heavily indebted countries — and projects implemented through EDF for as long as the U.K. continues contributing — much of this funding is only available to organizations based in the EU or European Economic Area, in developing countries, or in other countries that have a particular arrangement with the EU. 

As a result, U.K. NGOs and contractors’ access to at least some EU funding could be at risk after Brexit.

The European Commission and DFID have been at loggerheads over the issue, after the EU started inserting clauses into current contracts suggesting that funding to U.K. organizations could be terminated in the event of a no-deal Brexit.

No-deal Brexit: UK government will underwrite ejected aid contracts

The U.K. government has committed to taking on current aid contracts after the European Union began to introduce disclaimers in February in all contracts stating that U.K.-based partners could suddenly lose funding in the event of a no-deal Brexit.

In response, Mordaunt accused the commission of “discriminatory behavior.” DFID sought to reassure British aid organizations by offering to step in and cover lost ECHO funding under certain circumstances. But with the EU failing to respond to Mordaunt’s letter, tensions boiled over last week when the U.K. government abstained from voting on plans for EDF in protest.

NGOs are therefore anxious to know how Brexit will impact their access to EU funding sources.

Claire Godfrey, head of policy and campaigns at Bond, said U.K. aid entities’ needs are not fully covered by DFID’s commitment to underwrite humanitarian funding. “Underwriting NGO humanitarian contracts was a welcome step, and of course like all OECD-based NGOs we will continue to have access to funds for programs in low-income and heavily-indebted countries, but we have no such assurances for access to development funding in other countries.

DFID published more details of its commitment to underwrite humanitarian funds on Monday, which expands the commitment to subcontractors in U.K.-led consortia. DFID’s technical notice published in August only mentioned nonprofit organizations, thus appearing to exclude universities and private companies.

“There is so much uncertainty … not only are NGOs facing the prospect of potentially not having funds coming from the EU, but also changes in the exchange rate so the pound doesn’t stretch as far, and a possible contraction in the economy … all of which means less cash to the sector,” Godfrey said.

Influencing EU policy

The U.K.’s ability, as one of the most experienced aid donors in Europe, to influence the direction of EU development policy is also at stake in the Brexit negotiations.

The European development program is likely to be “less poverty-focused” and more aid money will be spent in middle-income countries if the U.K. is no longer part of the conversation, according to Simon Maxwell, chair of the European Think Tanks Group, who gave evidence before the parliamentary EU External Affairs Sub-Committee earlier this month.

Bond’s Godfrey agreed, saying she was concerned that Brexit could mean the U.K. is no longer able to be an “effective influencing force at the European level, promoting a progressive development agenda.”

Concerns were raised recently among Brussels-based civil society, after the proposal document for the EU’s overhauled aid system failed to mention poverty eradication as a specific objective.

Maxwell urged the U.K. government to do as much as possible to “build bridges” with its Brussels counterparts to push for a focus on poverty, and to make sure that “public goods” such as climate change are “as embedded as possible before we leave” the EU, he told politicians.

In response, Juliette Prodhan, head of EU policy at DFID, who also spoke at the evidence session, said her department was “very alive to the question of ensuring EU is spending ODA on poverty reduction and on focusing on the very poorest … [and] we will continue to hold them to account going forward.”

Update, Nov. 16: This story was updated to reflect new guidance.

Over the coming weeks, as Britain hurtles toward its exit from the European Union in March 2019, Devex will be exploring the impact of Brexit on aid. Keep an eye out for more stories to come, and comment below about topics you’d like to see covered.

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About the author

  • Edwards sopie

    Sophie Edwards

    Sophie Edwards is a reporter for Devex based in London covering global development news including global education, water and sanitation, innovative financing, the environment along with other topics. She has previously worked for NGOs, the World Bank and spent a number of years as a journalist for a regional newspaper in the U.K. She has an MA from the Institute of Development Studies and a BA from Cambridge University.