Money will be a critical part of Brexit negotiations. In this report written for ICAEW, we reveal the key components of a deal and estimate the potential EU exit bill.
Key points to highlight:
- Potential exit charges range from a low cost of £5bn to a maximum cost of £30bn, with the central scenario cost £15bn (based on an exchange rate of €1.20 to £1). This is equivalent to £225 per person expected to be living in the UK in 2019.
- To put this in context, the UK’s share of the EU budget each year is approximately £20-£21bn, before an estimated rebate of £5-6bn, and spending returning to the UK of £6-£7bn.
- While the estimated rebate is expected to be received back, the EU could attempt to withhold this if there is no agreement on wider exit charges.
- Liabilities include EU staff pension and sickness payments which will be close to £63bn when the UK leaves, and of which the UK’s share is £10bn. This could be dealt with through a one-off settlement or the UK could agree to continue to contribute £0.2bn a year for the next 50 years or so.
- The value of the EU’s fixed assets will also need to be determined, but as these are relatively small compared with other numbers revaluing them is unlikely to have significant impact on the total exit charge.
- Additional areas for negotiation include the European Investment Bank (EIB), of which the UK has a 16% share. As ownership of the EIB is restricted to EU members, the UK may need to sell its stake to other EU members, or existing rules may need to change.
- The EU is likely to argue that costs incurred caused by the UK’s decision to leave should be paid for by the UK rather than by other member states.
To find out more and to read the report, visit http://www.icaew.com/en/technical/economy/brexit/analysing-the-eu-exit-charge