The document discusses the potential impacts of Brexit on the EU budget and cohesion policy, highlighting uncertainties surrounding future funding and contributions. It suggests a projected annual shortfall of around 10 billion euros if the UK exits the EU, significantly affecting net contributors and various spending areas. Additionally, it emphasizes the need for reform in cohesion policy to align with new priorities and limited resources post-2020.

1. The impact of Brexit on the EU budget
and the future of Cohesion Policy
Robin Huguenot-Noël
Policy Analyst – European Policy Centre (EPC)
Riga, 24 November 2017

2. Brexit scenarios
Status quo
SM & CU
OR
?
Economic
continuity
Having cake &
eating it?
Ruled out by EU27
Economically
inferior to
SM/CU
Economically
very painful
Contradicts Brexit
red lines but only
solution for NI?
Not off-the-shelf
Complicated &
lengthy to
negotiate
Default position
NO ECONOMIC
DISRUPTION
MAXIMUM
ECONOMIC
HARM
(UK + EU27)
Towards the cliff edge
The economic/political trade-off
Exit
from
Brexit
OR
?
WTO no
deal
Chaotic
no deal
Bespoke
Partnership
SM
w/o
obligations
European Policy Centre (EPC)

3. Impact of Brexit
on the EU budget (1/2)
Uncertain outcome ...
• Academic debates on the
methodology
• Ad-hoc agreement for end of 2014-2020
MFF? For the post-2020 MFF?
• Dynamic effects and revenues from
customs union?
• Own resources to cover for the gap?
• Simplified estimate: permanent
shortfall of circa. 10 billion Euros p.a.
Source: Ewa Chomicz, “EU budget vs Brexit – in search of new status quo”,
European Policy Centre (EPC), February 2017
Brexit gap will depend on the nature of the
future relationship

4. Impact of Brexit
on the EU budget (2/2)
... with distributional impact
• Net contributors most affected
• MS direct contributions to EU budget
calculated on GNI basis
• ‘Rebate on the rebate’
Germany, Austria, Sweden, The
Netherlands
• Main spending areas under higher
pressure
 Cohesion Policy, CAP portrayed as
‘traditional policies’ Source: Haas, J. and Rubio, E. (2017), Brexit and the EU budget: Threat or
Opportunity, Jacques Delors Institute, Policy Paper 183
Spending cuts options in comparison

5. Impact of Brexit on Cohesion Policy
Source: Zuleeg & Chomicz, Regional Policy in the next MFF, European Policy Centre (EPC), February 2017.
ERDF and ESF eligibility are determined
on the basis of average GDP per capita
BREXIT GAP EU funding receipts shifting away from
regions close to the GDP threshold
19-24% cut in regional policy funding
after 2020 compared to current MFF
CP
IMPACT

6. Opportunities
for Cohesion Policy
EU budget ‘focusing on results’
• ‘EU added value’ at the core
Cohesion Policy has a strong-track
record
• Visible EU impact ‘on the ground’
• EU’s main ‘future investment’ policy 0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
Portugal
Croatia
Lithuania
Poland
Latvia
Hungary
Slovakia
Bulgaria
Romania
Estonia
CzechRepublic
Greece
Malta
Slovenia
Cyprus
Spain
Italy
Germany
Ireland
Belgium
France
UnitedKingdom
Finland
Austria
Sweden
Netherlands
Denmark
Luxembourg
Share of Cohesion Policy in public investment per
member state (2015-2017 average)
Source: European Commission, own graph

7. Challenges
for Cohesion Policy
... but hurdles on the way
• History of EU budget negotiations
(net contributors vs. net
receivers)
• Uncertainty on political agenda
(Brexit, new German elections)
Confusion about objectives of Cohesion Policy
CP under pressure to reform...
• Criticism linked to its
implementation
• Superposition of objectives
Source: Huguenot-Noël, Robin, Alison Hunter, and Fabian Zuleeg, “Can the EU Structural Funds reconcile the EU’s
growth, stability and solidarity objectives?”, European Policy Centre (EPC), October 2017.

8. Recommendations
• EU’s ‘Transformative Policy’
• Ex-ante conditionalities can help
achieve key EU objectives (e.g.
developing innovation strategies;
boosting administrative capacity)
• EU’s ‘Capacitating Engine’
• Social investment policies to help
modernise welfare state models
• EU’s ‘Inclusive Approach’
• Building upon ‘place-based approach’
and a new Territorial Agenda
Cohesion Policy as driver of EU’s ‘modernisation agenda’
Acknolwedge the context of the new EU budget Position Cohesion Policy in the post-2020 MFF
• New priorities with limited
resources
• Pressure for Eurozone focus
• Higher use of financial
instruments
• Understand whether and how they
can help achieve (e.g. Transport
infrastructure > social inclusion)
Identify
‘EU added
value’
of CP

9. Thank you for your
attention!
Contact
Robin Huguenot-Noël
Policy Analyst
@r_huguenotnoel
r.huguenot-noel@epc.eu