Counting the cost of Brexit

7th July 2016, posted in Uncategorized, by Bill Sterland

With our discussions in York of post-EU Referendum political events still fresh in the memory, I continue to be absorbed by the possible implications of Brexit for UK civil society organisations (CSOs), particularly those working in international peace and development.  The most obvious consequence for CSOs on the UK leaving the European Union will be an immediate loss of access to a variety of grant schemes and service contracts for their activities.  Currently, the funds received by UK development and humanitarian CSOs from the EU accounts for a significant proportion of their total income.  In preparing this blog I quickly checked the annual accounts of a random selection of development NGOs on the charity commission website.  I found that very often EU funds compose between 8-12% of an organisation’s revenue.  This seems to hold true for organisations of all sizes. So, for example, Oxfam UK received over £40 million or 10% of total income from EuropeAid and ECHO in 2015. In the case of Plan International EU funds of over £9 million amounted to 11% of total income in 2015, while for MAG (Mines Advisory Group) EU support of £2.9 million was a little under 9% of all revenues.

Something that was forgotten, or possibly thought inconvenient to mention by both sides during the referendum campaign, was that this EU funding for poverty reduction, peace, and emergency aid beyond the shores of little Britain was partly paid for by the UK’s gross (and notional) weekly contribution to the EU of £350 million.  In total, the UK provides around £1.1 billion / year to the EU’s development and humanitarian budgets. But it is not only CSOs working internationally that are supported by the EU institutions.  A very high number and a wide range of charities promoting social development and poverty reduction in the UK are also in receipt of sizable grant support from the European Social Fund and many of the EU directorates, although as a proportion of total income this support is considerably less significant than that received by development NGOs. .

EU funds may not be cut off for another two or three years, but the Referendum decision is already impacting negatively on the UK’s development NGOs.  The sharp drop in the pound against major currencies since the Referendum will mean that INGOs’ purchasing power in the developing countries where they operate is likely to weaken accordingly.  The civil society knowledge hub for finance and fundraising, Baobab estimates that if today’s Sterling rates persist (up to 10% below pre-referendum levels), INGOs should expect to be making cuts to programme budgets of around 5%.

With regard to funding from the UK government, UK development CSOs and international development in general are currently in a relatively favourable position.  The UK is one of only five EU member states which is fulfilling its commitment to maintain ODA at above 0.7% of GNI and the UK is the second largest donor to civil society after the USA, channelling £2.6 billion of its ODA through CSOs, amounting to 12% of the global total.  It might be expected that the UK will maintain this support in the short-to-medium term, but there are plenty of reasons to suggest that the UK will cut back on ODA in the not-too-distant future.  In the first place, the 0.7% commitment is one arising out of EU membership which entails obligations to promote poverty reduction and sustainable development around the world.  Given the likely continuing economic turmoil in the UK and further prolonging of austerity measures, there is no reason to suppose that a post-Brexit UK government will continue to honour the pledges of its pro-Remain predecessor to support EU policy and values

It is perhaps here, in the realm of policy and values, that INGOs, civil society more generally and the country as a whole will be poorer for leaving the EU.  With all the distractions caused by our almost paranoid panicking over swarming immigrants and our protests over thieving Brussels bureaucrats, we have lost sight of the fact that the EU’s purpose and meaning is much more significant.  The Union is founded in the core values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities.  In addition, the societies of the Member States are characterised by pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men.  I understand the EU as a grand template for good governance, whose growing weight and influence both in Europe and throughout the world has enabled it over the years to act as a real force for peace, development, and social justice.  For me it is desperately sad that the UK has decided to leave the EU for not only does it appear to weaken the UK’s commitment to promote the EU’s values throughout the world, it also reduces the opportunities of UK INGOs to act and weakens the EU’s influence and financial power as a promoter of peace and development.

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2 thoughts on “Counting the cost of Brexit

    • According to briefing paper on Brexit at Baobab, UK development NGOs receive a total of approximately £300 million / year. It’s not clear how much UK charities providing services in the UK get back from the other EU institutions, although in total this is likely to be considerably lower than support to UK INGOs.

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