On Christmas Day 2020, the European Commission announced a ‘Brexit Adjustment Reserve” – a fund of €5 billion available to support to businesses across the 27 Member States.
It was published in Brussels just one day after the EU concluded a draft trade deal with the UK.
Brexit Adjustment Reserve
At 23:00 GMT on 31 December 2020 – midnight in Brussels – Great Britain leaves the EU ‘single market’ and EU ‘customs union’.
Even with the new ‘EU-UK Trade and Cooperation Agreement’ in place, there will be big changes on 1 January 2021. There will be disruption to smooth operations and ‘business as usual’ for millions of companies and hundreds of millions of citizens.
The EU ‘Brexit Adjustment Reserve’ will: “provide support to Member States, regions and sectors, in particular those that are worst affected by the adverse consequences of the withdrawal of the UK from the Union, mitigating thus its impact on economic, social and territorial cohesion.”
It aims to fund “specific measures set up by the Member States to help businesses and economic sectors, workers, regions and local communities suffering from the impact of the end of transition period”.
The Brexit Reserve will apply across all 27 Member States – with up to €5 billion in total available.
Its allocation method, architecture and functioning have been designed to focus support to those that are “worst affected”. It has been set up as a “special instrument” – and is, therefore, additional to the EU budget ceilings set in the ‘Multiannual Financial Framework 2021-2027’.
Financial support will be disbursed in two allocation rounds. The first – and more substantial one – will be activated in 2021. The amount per Member State will be determined “taking into account the relative degree of economic integration with the UK, including trade in goods and services” – and an amount to reflect the “losses that some Member States will suffer from the limitations in accessing the UK waters for fishing activities”.
The second payment round will be disbursed in 2024 as based on the expenditure incurred and declared to the Commission – and how the initial tranche was put to use.
The Reserve will support “measures specifically set up in relation to the withdrawal of the UK from the Union.” Measures can include the following:
- support to economic sectors, business and local communities, including those dependent on fishing activities in the UK waters;
- support to employment and reintegration in the labour market of citizens returning from the UK, including through short-time work schemes, re-skilling and training; and
- ensuring the functioning of border, customs, sanitary and phytosanitary and security controls, fisheries control, certification and authorisation regimes, communication, information and awareness raising for citizens and businesses.
Each Member State can design and implement “necessary measures aimed at stemming the immediate impact of the withdrawal.”
The withdrawal of the UK from the EU: “poses specific risks to the fisheries sector in terms of less favourable access to the UK waters.” This has been taken into account in calculating the initial disbursement to Member States.
Member States must: “respect of the principles of sound financial management, transparency and non-discrimination and the absence of conflict of interest.” The Commission’s proposal sets out requirements for the: “management, control and audit of the financial contribution under the Reserve” – striking the right balance between legality and regularity of expenditure on the one hand and simplification on the other.
Member States may use “existing systems already used for the management and control of cohesion policy funding or the European Union Solidarity Fund.”
The Brexit Adjustment Reserve will be made available “as soon as possible” to address the immediate consequences of the withdrawal.
Free movement of persons, goods, services and capital between the EU and UK ends as the UK leaves the EU. For the avoidance of doubt this means: the EU single market; the EU customs union; all EU regulatory regimes; and all EU ‘international agreements’.
The EU and the UK will, from 1 January 2021, form two separate markets – two distinct regulatory and sovereign legal spaces. This will, according to the European Commission: “recreate barriers to trade in goods and services and to cross-border mobility and exchanges that have not existed for decades”. It impacts “public administrations, businesses, citizens and stakeholders on both sides”.
There is no equivalent financial support proposed by the UK Government to businesses in Great Britain.