EU cut direct grants to UK firms by 20% in the run up to Brexit

31 January 2019 Consultancy.uk

A reduction in EU funding is hitting small and mid-sized enterprises in the UK, according to research from a UK accounting and advisory firm. Grants to British firms from the European Development Fund have fallen by 20% in the last year.

Factoring in a £5.6 billion rebate in 2017, the UK Government paid £13 billion to the EU budget. Each year, following this payment, the Government then gets some of that money back. In 2017 that was forecast to be £4 billion, meaning UK’s ‘net contribution’ was estimated at nearly £9 billion. Each year the money sent back is spent on things the Government may or may not choose to fund upon leaving the EU, including payments to farmers and for poorer areas of the country such as Wales and Cornwall, as well as grants to small and mid-sized enterprises (SMEs).

Grants from the EU are financial contributions to projects from the EU budget or the European Development Fund. These are given to specific projects related to EU policy goals, and usually follow a ‘call for proposals’ which external organisations then bid for. Areas which are known to receive such funding include agriculture, climate action, digital society and economy, migration and maritime affairs. While the possibility remains that these areas will continue to receive state funding while cutting out the ‘middle man’ of the EU, many fear the opposite will become the case.EU cut direct grants to UK firms by 20% in the run up to Brexit

Among the opponents of the UK’s divorce from the EU, there has been some consternation that these funds will dry up post-Brexit, leaving many of Britain’s brightest new businesses starved of vital assets. Now, according to professional services firm UHY Hacker Young, that forecast is already coming to pass, with the firm contending that the value of grants given directly by the EU to UK organisations has already dropped by 20%, falling from €1.94 billion in 2016 to €1.55 billion in 2017.

UHY added that other EU member states have seen marked increases in grants over the same period, with EU grants to Germany increasing by 20% from €1.41 billion to €1.93 billion, and grants to France increasing by 16% from €1.32 billion to €1.53 billion. EU grant funding secured by UK organisations is meanwhile guaranteed until the end of 2020; however, it is not anticipated that any EU grant funding will be available to UK businesses once Brexit is complete, possibly leaving them without vital funds to put towards research and development.

Andrew Hulse, a Partner in UHY’s Sheffield office, said, “We all knew that EU grant funding to the UK was likely to be cut after Brexit, but it appears the EU got a two-year head start on the process. UK businesses are already missing out on hundreds of millions of euros in funding. The Government needs to recognise this shortfall and urgently put in place targeted grants appropriate to the needs of businesses and particularly SMEs where this funding often has the greatest impact.”

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