The domestic politics of negotiating Brexit: EU money?

The UK makes an average net contribution to the EU of £7.1bn.

According to the Office for National Statistics (ONS), on average the UK Government contributes £12.7bn a year to the EU, and receives £5.6bn. This contribution was on average £3.6bn less than might have been expected based on the EU’s funding formula, because the UK negotiated a rebate from the EU in 1984. Of that £12.7bn, roughly £5.6bn comes back to the UK in the form of transfers to the public sector and to private bodies, leaving a net contribution to the EU of £7.1bn.

The majority of the EU’s spending in the UK goes on supporting the agricultural industry.

In 2015, the EU’s budget for spending in the UK was €7.5bn (around £6.2bn – note that this refers to a single year, not the multi-year averages referenced above). 96% of these funds were spent on three areas: agriculture (51%), regional policy (structural and cohesion funds) (24%) and research and development (21%).

In agriculture, the vast majority of EU spending comes in the form of direct payments to UK farmers under the Common Agricultural Policy (around €3bn in 2015), with a smaller amount (€0.6bn) allocated for developing the wider rural economy. The two main regional policy funding streams are the European Regional Development Fund (ERDF) and the European Social Fund (ESF). These target less prosperous areas and focus on creating growth and jobs where living standards fall short of the EU average. In 2015, the UK received €1.8bn from these funds. UK universities and private research institutions can access funding through a number of EU mechanisms. The most important is the Horizon 2020 programme: in 2015, 76% of the money the UK received from the EU for research and development came from this funding stream (€1.2bn). Perhaps unsurprisingly, groups representing each of these sectors (such as the National Union of Farmers, the Local Government Association and Universities UK) have been vocal in outlining the consequences of Brexit and have called on government to provide assurances that their funding will be protected.

Different regions benefit differently from these EU funding streams.

In agriculture, farmers in Scotland, the South West of England, and Northern Ireland benefit the most from EU funds. Direct payments to these areas totalled £400m, £343m and £310m respectively in 2014-15.

In regional policy, Wales and the North West of England receive the highest allocations in absolute terms.

In research and development, London, the South East, Scotland and the East of England benefit the most from EU funds.

Differing regional interests complicate any Brexit deal.

The UK-EU negotiation is not going to be a simple two-way negotiation, but will involve managing multiple negotiations at the regional, domestic and international level – many at the same time. Any Brexit deal will have to be acceptable not just to the EU and member states, but to the UK public and UK interest groups. Managing these domestic politics will be complicated by the fact that different regions and sectors have very different sets of priorities in terms of what they would like to get out of any deal struck with the EU.

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