Monday 2 July 2018, The financial settlement for the UK leaving the EU is to be higher than ICAEW’s upper estimate in its May 2017 brief ‘Analysing the EU Exit Charge’. Key factors increasing costs are less money being returned from the European Investment Bank (EIB) and the agreement of a transition period.
HM Treasury’s estimate of £37bn is £7bn higher than ICAEW’s original upper scenario analysis. Updated to reflect the latest negotiations, the settlement equates to £300 per person in the UK, an increase of £50 from the original estimate of £250 per person.
A method for calculating a financial settlement to be paid by the UK after it ceases to be an EU member state has recently been agreed meaning that there is a much clearer idea of what the UK will have to pay to settle its financial obligations.
The UK will remain a financial contributor through to the end of the EU’s current multi-year financial framework on 31 December 2020 rather than the assumed exit date of 29 March 2019. This longer transition period will mean further contributions will have to be made.
Vernon Soare, ICAEW Chief Operating Officer, said: “One of the most significant differences between our original estimate and HM Treasury’s current estimated cost of leaving concerns the UK’s 16% shareholding in the European Investment Bank (EIB). We assumed that the UK would be entitled to recover its full share of net assets, estimated at £10bn, but instead the UK will only receive its original investment of £3bn, with no accompanying share of profits – this is the most puzzling outcome from the negotiations and adds significantly to the exit settlement.”
Vernon Soare adds: “We should remember that the agreement of the financial settlement is only the first step. The nature of the UK’s future financial relationship with the EU has yet to be negotiated and will be of greater significance to the UK’s long term economic prosperity than the size of the settlement.”
For further information please go to https://www.icaew.com/technical/economy/brexit/analysing-the-eu-exit-charge
Please direct all media inquiries related to this article to:
Caroline Florence - ICAEW press office
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