Brexit impact on EU funding
How will Brexit affect UK involvement in EU funded projects?
A “no-deal” Brexit will create the most uncertainty, as European funding will no longer be available to UK partners after the UK’s departure date (including for projects already running at that time). Organisations must therefore prepare in the best way possible to mitigate the impact.
Were there to be no Brexit, the current European Multiannual Financial Framework (MFF) guarantees the UK’s full participation in EU funding programmes (e.g. the R&D flagship ‘Horizon 2020’ programme) for the period running from 2014 to 2020. However, the UK will no longer be part of the MFF once Brexit enters into force.
Through Horizon 2020, the UK has so far received over EUR 5 billion in funding, supporting approximately 11,000 participating legal entities in more than 6600 projects1. The UK contributes 11% of the EU's total budget, but receives approximately 16% of EU science funds, making it a “net beneficiary” of these funding programmes. In a post-Brexit future, UK organisations will be able to take part in EU-funded programmes, but will not be eligible for EU grants and will have to fund their participation themselves, or from other sources2.
So what are the consequences for UK organisations, whether they are already participating as partners in (e.g.) Horizon 2020 funded projects, or are applying for EU funding?
As things stand, there are currently two possible scenarios for Brexit3:
- The UK leaves the EU under a ‘withdrawal agreement’, such as the deal agreed in November 2018 by UK Prime Minister Theresa May with the European Union, but rejected for the second time by the House of Commons on 12 March 2019. In the withdrawal agreement, the UK’s continued participation in EU funding programmes was agreed upon as part of the transition arrangements. Should the UK negotiate an amended Brexit deal with the EU, this arrangement could be maintained.
- A ‘no-deal Brexit’ (or ‘hard Brexit’) would see UK partners in current EU-funded projects become ineligible for funding after 29 March 2019 or an alternative eventual date at which Brexit occurs. The current contracts will not protect these partners.
2 It is potentially possible for UK organisations to benefit from EU funds in certain circumstances, namely when the EU specifically requires UK participation linked to the subject matter of the grant programme or project
3 Brexit will be cancelled if the UK unilaterally revokes Article 50. In that context, the UK’s position in relation to EU funding would remain unchanged.
"In a post-Brexit future, UK organisations will be able to take part in EU-funded programmes, but will not be eligible for EU grants..."
Preparing for a “no-deal” Brexit: taking measures with regard to EU funding
A “no-deal” Brexit will obviously create the most uncertainty, as European funding will no longer be available to UK partners after the UK’s departure date (including for projects already running at that time). Organisations must therefore prepare in the best way possible to mitigate the impact.
How can beneficiaries prepare themselves for a “no-deal” Brexit, and which elements should be considered?
1. For new projects
Project participants from non-EU Member States are only eligible for EU funding in specific circumstances. For example, some calls for proposals require the involvement of specific partners from outside the EU. Or alternatively, in the contract negotiation phase with the EC, a participant from a non-Member State is agreed to be necessary for project execution and thereby also to be eligible for EU funding. Since none of these special circumstances will be in place for already running EU-funded projects after a hard Brexit, UK participants in these projects will no longer be eligible for funding from EU sources. While UK partners would still be allowed to continue their participation in EU projects, they will not receive EU funding for their activities. Moreover, their participation will not count towards the key criterion requiring collaboration between a minimum number of EU Member States in a funded project. This implies the following:
- If a party is currently in the process of drafting a project proposal within a European Commission framework (including Horizon 2020), and one or more of its partners is/are located in the UK, it is highly advisable for this party and its consortium partners to discuss the different possible scenarios and how to specifically cope with a ‘no-deal Brexit’ outcome;
- Specific attention should be given to how the UK parties’ project costs will be covered for the period after Brexit, in order to maintain their involvement in the consortium and not deter them from participating. This funding gap can perhaps be covered by the UK parties’ own available funds or through co-funding by the EU-based consortium partners.
2. For projects where negotiations have been recently completed with the European Commission
The following measures should be considered:
- All consortium agreements now already include a clause in the Evaluation Letter, stating that ‘a project (with UK partners) will only be EU funded until the end of the project life cycle, if a withdrawal agreement is established’.
- It is highly advisable to start discussing the potential consequences with the consortium partners without delay. If the consortium believes that it is essential or valuable to maintain the participation of the UK partners, then clear agreements will need to be made to ensure that their costs will be covered.
3. Ongoing/Running projects
As mentioned, UK partners will lose their automatic eligibility for EU funding in a ‘no-deal Brexit’ scenario. The European Commission will offer UK partners the option to exit ongoing projects after a no-deal Brexit, but this can of course have significant consequences:
- An alternative partner who can fulfil the UK partner(s)’ technical capacities and role in the project may need to be found;
- A partner’s withdrawal may render the project as a whole ineligible for further funding, given that the number of participating EU Member States in the project may fall short of the required minimum (e.g. a COST consortium must include at least five EU Member States; a Horizon 2020 Research and Innovation Action should involve at least three). This means that if a project collapses, the consortium partners will only receive compensation for activities up to the definitive Brexit date.
In an attempt to manage this situation, the UK Finance Ministry (HM Treasury) announced an ‘Underwrite Guarantee’ on 24 July 2018, in anticipation of the UK’s departure from the EU. In this document, the British government commits to assuming all of the EU’s financial obligations to UK partners in ongoing EU projects. This is applicable to Horizon 2020, but also to UK partners participating in a Euratom Research and Training project or an ongoing Framework Programme 7 project. UK partners involved in EU projects are advised to register through a portal managed by UK Research and Innovation (UKRI), in order to be able to apply for UK funding and receive additional and relevant Brexit information.
With a ‘no-deal Brexit’ remaining a real possibility, Deloitte recommends immediate preparation for this scenario. Deloitte’s EU funding, IP & legal experts are available to provide support or additional information.