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Following direct requests from several member states, EU negotiators have revised their initial calculations to maximise the liabilities Britain is asked to cover, including post-Brexit farm payments and EU administration fees in 2019 and 2020.
Although over coming decades Britain’s net bill would be lower than the €100bn upfront settlement, the more stringent approach to Britain’s outstanding obligations significantly increases the estimated €60bn charge mentioned by Jean-Claude Juncker, the European Commission president.
It also reflects the steadily hardening position of many EU member states, which have abandoned early reservations about the bill’s political risks to pile on demands that will help to plug a Brexit-related hole in the bloc’s common budget. Paris and Warsaw have pushed for the inclusion of post-Brexit annual farm payments, while Berlin is against granting Britain a share of EU assets.
Estimates of Britain’s Brexit bill are highly variable because they include assumptions on Britain’s exit date, its proper share of contributions, UK receipts such as its budget rebate or EU investment spending, and the type of liabilities it is expected to honour. European diplomats consider this flexibility as helpful in reaching a deal.
The hefty bill represents one of the biggest early obstacles to a smooth Brexit. To the alarm of the EU side, Theresa May bluntly rejected the notion of an exit bill at a recent dinner with Mr Juncker, saying any financial terms would be tied to securing a trade deal by 2019. On Tuesday, she promised to be a “bloody difficult woman” in talks.
Michel Barnier, the EU’s chief negotiator, has said no figure will be set until the end of the Brexit process and payments could be staggered. But he wants Britain to agree a methodology before trade talks can begin, including a definition of EU liabilities the UK would be expected to share. He will unveil a draft negotiating mandate — including the Brexit bill assumptions — on Wednesday.
€82bn-€109bn Bruegel think-tank estimates of the upfront payment Britain would need to make As well as adding €10bn-€15bn of mainly farm- related payments, the commission’s tougher approach denies London a share of assets such as buildings. Significantly, it requires upfront payment for contingent guarantees and loans to countries such as Ukraine and Portugal, with Britain being reimbursed as the loans are repaid.
According to FT calculations, this brings the upfront gross settlement demand to approximately €91bn-€113bn, depending on how Britain’s share is calculated. Over a period of a decade or more, this would be reduced in net terms to roughly €55bn-€75bn as Britain received its share of EU spending and repaid EU loans.
Using similar assumptions, the Bruegel think-tank estimates that Britain would make an upfront payment of €82bn-€109bn, which would net out to €42bn-€65bn over the long term. Compared with the FT and some commission officials, Bruegel uses a higher estimate of expected EU spending in the UK and a lower estimate of net pension liabilities. [...]
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