UK faces Brexit divorce bill of up to 20 billion euros – CNBC

The 20 billion euros upper estimate covers Britain’s share of continuing multiyear liabilities, including unpaid budget appropriations of 241 billion euros, pensions liabilities of 63.8 billion euros and future contractual and other spending commitments totalling about 32 billion euros.

British Eurosceptic MPs are likely to react badly to the news that UK taxpayers might have to pay billions of pounds to Europe as the price of Brexit. One minister said: “It will have to be explained very carefully, to explain what we are getting in return for market access.”

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The pound hit its lowest level on record on Wednesday, according to a Bank of England trade-weighted index, as markets priced in the possibility of a hard Brexit and the prospect of difficult negotiations with the rest of the EU.

Iain Begg, a London School of Economics expert on the EU budget who described the premise of FT calculations of the legacy bill as “completely sound”, said the budget fight was shaping up to be a “battle royal”.

The FT’s analysis is the first attempt to fully quantify the UK’s legacy liabilities in the EU budget, an issue expected to be a flashpoint in the formal exit talks.

To date, economic analyses of Brexit undertaken by bodies such as the UK Treasury have not taken full account of the cost of untangling EU budget commitments.

The precise withdrawal bill is impossible to calculate and will depend on a political deal. However, officials from four EU-27 countries who reviewed the FT’s estimates said they reasonably represented the sums at stake. Some questioned certain assumptions that reduced Britain’s exit bill, arguing that the UK must make good on all its spending promises, not just to 2019 but to the end EU’s long-term budget in 2020.

Brexit blows a hole in the EU’s budget, with potentially far-reaching political consequences. It confronts Germany, Italy, France and other net contributors with the dilemma of filling any gap or scrapping programmes that Brussels and eastern and central European countries see as legally binding promises.

Britain’s 20 billion euros reckoning would only cover spending already approved on projects within the EU-27, not the future shortfall created after 2019 by Britain’s withdrawal from the long-term EU budget.

It also excludes EU spending on UK organisations. Philip Hammond, UK chancellor, has pledged to protect the funding for most, but not necessarily all, of these programmes where a British organisation is involved.

Brexit campaigners claimed the UK could save £350 million a week by leaving the EU.

The budget will be a big factor in several aspects of the withdrawal talks. Senior EU diplomats expect the EU-27 to tie the settlement of Britain’s budget bill to any Brexit transition arrangements — a priority for UK business, which is keen to retain access to European markets while a long-term trade deal is agreed.

Jean Arthuis, chair of the European Parliament budget committee, said Britain should honour projects signed off when it was a member. “The UK can pull out of the EU but it cannot escape its obligations under international law, especially if it wishes to become a ‘global leader’ in trade,” he said. “This is a matter of credibility. Brexit is not a poker table.”

In addition to making good on previous promises, the EU-27 would demand future EU budget payments as a condition of single-market access.

Such a stance is likely to anger many campaigners against UK membership of the bloc.

Conor Burns, a Eurosceptic Conservative MP, said: “Leaving the EU doesn’t mean paying money into the EU, having free movement in the EU and applying the law of the EU. Those three things, I believe, were specifically rejected by the British people on June 23.”

But one former UK minister said: “We could actually end up paying more into the EU budget. That will be a big story in the next two years.”

UK faces Brexit divorce bill of up to 20 billion euros – CNBC

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