Bruegel: EU budget implications of a no-deal Brexit

14 January 2019

A no-deal Brexit would mean the UK’s contributions to the EU budget fall to zero as of March 30th 2019. The author here calculates an estimate of the budget shortfall that would have to be covered in this case, and how the burden would fall across different member states.

[...] In this post I focus on the current multi-annual financial framework (MFF) in order to assess the near-term (2019 and 2020) necessary extra contribution to the EU budget in case of zero UK contribution after Brexit. After making certain assumptions and simplifications (see the end of the post), I find that in an extreme scenario – in which the UK will not contribute at all after 29 March 2019, and EU spending in the UK fully stops that day – the total Brexit hole in the EU budget for March 30th 2019-December 31st 2020 could amount to about €16.5 billion, or 0.066% of EU27 gross national income (GNI).

This figure relates to the extra transfer needed by members states to the EU budget, yet an offsetting factor is the 20% of customs duties on imports from the UK retained by member states, which could amount to €0.8 billion in the same period (80% of customs duty revenues go to the EU budget and 20% is retained by the member states). Thereby, the extra direct financial burden on the public budgets of the 27 members states would be €15.7 billion, or 0.062% of GNI. [...]

Assumptions for the calculation about the cross-country distribution of the Brexit financing gap:

• The €16.5 billion, March 30th 2019-December 31st 2020 gap is to be distributed among the member states according to their GNI;
• The corrections mechanisms (“rebates on rebates”) are not considered in this calculation;
• Member states retain 20% of customs-duty revenues: the orange bars show the estimates using the assumptions discussed above, considering the 2017 distribution of imports from the UK across the 27 member states.

Full results

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