Here’s how important the UK is to the European Union
European finance ministers are wary of member countries raising their budget contributions to make up for the UK’s exit from the EU
Britain’s exit from the European Union means that one of the bloc’s biggest economies will stop making contributions to its budget.
This raises questions as to how long the U.K. will continue to pay its share of the budget and how can the EU fill the gap once Britain has officially left.
The U.K. has already said it will not pay a 60 billion euro (US$64.73 billion) bill to leave the bloc – money that according to the EU would be used for the U.K.’s share of commitments to the pensions of its workers and U.K.-based projects that have already received funding approval.
At the same time, some member states have already told Brussels they are not willing to pay more into the EU budget to compensate for the U.K.’s departure.
CNBC takes a look at the importance of the U.K. to the EU budget and what other countries are willing to do about it.
The UK is one of the main contributors to the EU budget
In 2014, the U.K. was the fourth largest national contributor to the EU budget, after Germany, France and Italy. It paid a total of 11.34 billion euros (US$12.24 billion) to a budget of 116.53 billion euros.
In 2015, that contribution rose to 18.20 billion euros of a total of 118.60 billion euros.
“In 2015, the U.K. was the 3rd largest net contributor to the EU budget after Germany and France. The U.K. was the 6th largest recipient of EU expenditure in total in 2015, but its EU expenditure share measured in percentage of the GNI was the lowest at 0.30 per cent,” a document prepared for European lawmakers and obtained by CNBC said.
Where does the EU money go?
The U.K. spends most of its EU money on agriculture and regional development.
But EU funds are also used to combat terrorism, boost job creation and contribute to projects in non-EU countries. It also covers the administrative expenditure of all the European institutions, pensions and EU-run schools for the children of EU employees.
How many UK employees work in European institutions?
“Under assumption that the average share of U.K. nationals in the EU institutions is around four per cent out of the total of 45,845, the number of permanent and temporary EU staff of U.K. nationality could be estimated to be some 1,800, not including contract agents, freelancers, service providers, MEP assistants, seconded national experts,” the parliamentary document said.
The controversial “exit bill” that has been mentioned by EU officials includes the costs to relocate EU institutions based in the U.K.
Apart from 52 European Commission staff based in the U.K. and 17 members working for the European Parliament spread across London and Edinburgh, there are two EU agencies that will need to be moved: The European Medicines Agency and the European Banking Authority.
When will the UK stop contributing to the budget?
This is one of the big doubts surrounding the Brexit talks. The EU budget is organised in a seven-year time frame that regulates its annual spending – called the Multiannual Financial Framework.
The last one was arranged for the years between 2014 and 2020.
‘I will not pay more’
The U.K. is poised to leave the European Union in March of 2019. This means that the EU will have to decide how it will organise its budget between that time and the end of 2020.
The European Union has finally started showing some signs of recovery since the financial crisis. But increasing member states’ contributions to the budget could prove a hard nut to crack.
Günther Oettinger, the German commissioner, said in an interview last month that Germany and other net contributors will have to step up their contributions as a result of Brexit.
Germany’s foreign affairs minister Sigmar Gabriel told the FAZ newspaper earlier this week that Germany should offer to pay more into the EU budget.
However, Jens Spahn, the state secretary to the German finance minister, told a newspaper in January that there is no automatic mechanism that would force Germany and other net contributors to raise their contributions. He said at the time that the EU budget would shrink because of Brexit.
— Tore Keller (@ToreKeller) March 21, 2017
The Danish Minister of Finance, Kristian Jensen, also voiced a similar opinion. He told the economic newspaper Borsen on Tuesday that Denmark will not pay more into the EU budget after Brexit. He added that the budget should in fact be cut.
“All we know for the moment is that Brexit will lead to a reduction of revenue in the EU budget,” an EU official, who didn’t want to be named due to controversy around the topic, told CNBC.
“But nobody knows whether this will be addressed through higher contributions from the remaining member states, the creation of a new revenue source, the reduction of EU expenditure or a combination of these three options,” he added.
The same official said that member states have not officially voiced their opinions on the future of the EU budget. “It is too early,” he said.