This Commons Library briefing looks at the funding received by the UK from EU institutions and considers the implications of Brexit on the EU as a source of funding for regional development, agriculture support, research and innovation and other areas.Jump to full report >>
Public and private sector organisations in the UK receive funding from the EU through various channels – the UK received a total of €6.3 billion (about £5.5 billion) in 2017. The majority of EU funding is administered in partnership with national and regional authorities in Member States, though a share of it is directly administered by the European Commission.
The two most significant funding channels for the UK are the European Structural and Investment (ESI) funds and the European Agricultural Guarantee Fund. For the current funding period (2014-20), the UK has been allocated €17.2 billion and €22.5 billion through these funds respectively.
The ESI Funds are the EU’s instrument for reducing disparities in the level of development of its various regions and for helping less developed regions to catch up. The bulk of UK funding via this channel comes through the European Regional Development Fund (ERDF), which has been allocated €5.8 billion of EU funds, and the European Social Fund (ESF) with an allocation of €4.9 billion.
Different regions within the UK have been allocated varying levels of funding, with less developed areas (particularly in West Wales and the South West of England) receiving more per person than other areas. The largest single allocation of 2014-2020 ESI funding in England is for the National Offender Management Service (NOMS) to fund activities that support the reintegration of prisoners back into the work force. 53% of the cost of this £247 million project will be funded by the ESF, with the remainder met through national co-financing.
The European Agricultural Guarantee Fund (EAGF) is the primary financial mechanism used for the implementation of the EU’s Common Agricultural Policy (CAP). The EAGF consists of direct payments to farmers to stabilise their revenues and market measures to tackle specific market situations, and the UK has been allocated €22.5 billion for the period 2014-20.
Organisations in the UK can also apply directly to the European Commission for funding from various other streams, often on a competitive basis following calls for applications. The UK is one of the leading Member States in securing funding for research and innovation and various other projects, with around 14% of funds allocated from the Horizon 2020 programme going to the UK, and British universities are in the top four higher education recipients to date. The typical aggregate value of direct funding is around £1-1.5 billion per year.
In addition, projects in the UK can be supported by EU institutions with funding from outside the EU Budget. Most notably, the European Investment Bank (EIB) – which borrows money on capital markets and lends it on favourable terms to projects that support EU objectives – committed an average of €5.4 billion to UK projects each year between 2011 and 2017. Many of these were major infrastructure projects, as well as some supporting growth and employment.
Non-Member States also have access to certain streams of EU funding. Countries that are closely aligned with the EU and participate in programmes alongside Member States typically have to make payments into the EU Budget, generally relative to the size of their economy. Other funding streams are available for countries seeking accession to the EU or sharing a border with it, and some aid funding also goes to developing countries through instruments such as the European Development Fund.
The UK Government has guaranteed all funding from the EU until the end of 2020, regardless of whether it concludes a deal with the EU; the UK has said that it wishes to continue to participate in some EU programmes, but the exact form that this will take (and domestic replacements for funding) will be a subject of further negotiations and policy-making.
Commons Briefing papers CBP-7847
Author: Philip Brien