Over the past few days, we have been unpicking the UK-EU joint report on progress during phase one of Brexit negotiations.
We have long called for greater certainty and clarity from these negotiations, and it seems as if we may finally have some.
The most controversial issue, and the one of most relevance to our profession, has been the financial settlement. It was extremely welcome to see a methodology for addressing this, transparently laid out in the report.
Overall, we now anticipate net exit payments to amount to £35 billion - an increase of £5 billion on our original calculation in our “Analysing the EU Exit Charge” publication earlier in the year.
It is clear that the agreements in the UK-EU report are a compromise.
The UK will pay in full for the 21-month period post-Brexit, up until the end of 2020, in effect remaining a full member for financial purposes until this time. However, the UK will also be subject to a protection clause, so that we will not pay extra for decisions made following our official withdrawal on 29th March 2019.
As expected, the UK will pay for authorised expenditures that have not yet been paid. These will be settled gradually, so with a declining payment stream from 2021. There is also an option to agree a formula or final settlement at some point.
Some of our assets and liabilities will be removed from the EU balance sheet, but our most significant liability – pensions – will remain. Those that remain will take some time to settle in full, and we will continue to contribute as payment is due on items and receive assets as they mature.
You can read the full report here.
Phase Two and Beyond
Crucially, this now allows us to progress to talks on a future UK-EU trade agreement, and to give businesses the certainty they so desperately need to plan ahead.
There will be many strong opinions on the agreed sums, but it is important to remember that in the long-term, this progress will benefit our economy. The costs of an alternative “cliff edge” would have likely been much greater.
The value of a close, flexible and mutually beneficial economic relationship between the UK and the EU27 is a price worth paying.