UK companies working in fields from development to aviation and haulage are being warned that the EU will shut down their ability to operate across Europe and block funding streams from Brussels in the event of a “no deal” Brexit.
In a stark reminder of the high stakes in the negotiations, the European commission has drawn up a series of documents in which it seeks to communicate directly with UK businesses and charities about the damaging consequences of failure to reach an agreement on the terms of withdrawal.
Across a wide range of sectors, the EU makes clear that unless a deal is agreed by October, in time for ratification by the European parliament and the House of Commons before the UK leaves the bloc in March 2019, the status quo will come to an abrupt end. Ambassadors and officials from the 27 EU member states are meeting on Thursday to further discuss their “preparedness” for a cliff edge Brexit, it is understood.
In the latest development, a leaked EU document obtained by the Guardian reveals that UK-based applicants for funding from the European commission to carry out development and aid work are to be issued with a legal disclaimer from this month.
The commission says that without a Brexit deal, UK-registered entities that have won contracts, grants or prizes “will cease to receive funding”.
Those seeking contracts with the commission across seven programmes worth billions of pounds are instructed that if a procurement process runs beyond Brexit day, their application will be rejected and they will not be able to recoup funds spent during the process.
Between 2012 and 2016, €1.2bn (£1.06bn) was paid by the EU to UK development and aid organisations for their work on behalf of Brussels around the world. Contracts and grants worth €356.9m (£315.4m) were awarded to UK organisations in 2016.
A recent report for Bond, the lobby group for the development sector, had already suggested many such organisations were “actively considering, and others have already set out to, establish offices in other European countries, with Ireland as a favourite”.
This week the European commission rejected claims it was discriminating against the UK while it was still a member. In a letter from David Davis to Theresa May leaked to the Financial Times, the Brexit secretary had complained that British economic interests were being damaged by the bloc’s preparations for a possible “no deal” Brexit.
EU regulators have issued a series of warning memos to industries including pharma, fisheries, aviation and transport about the consequences of the UK becoming a “third country” on 30 March 2019.
Davis said the warnings would encourage UK-based entities to move elsewhere in Europe. The commission, in response, said it was “surprised that the UK is surprised that we are preparing for a scenario announced by the UK government itself”. The prime minister has repeatedly claimed that “no deal is better than a bad deal”.
The UK’s development sector is the second largest recipient of EU funding through grants and commercial contracts, and its size gave it a powerful voice in shaping the direction of the bloc’s development policies. The most-funded sectors in 2016 were democracy and human rights, migration and food security.
The EU document, drafted on 20 December, explains that while “the management of EU funds will depend both on the outcome of the ongoing negotiations” and the current rules on non-EU states participating in programmes, the bloc needs to take legal steps to ensure organisations in the UK understand the risks facing them.
The document says: “The commission must inform applicants originating from or established in the UK wishing to take part in EU grants and prizes award procedures that if there is no agreement concluded between the UK and the European Union ensuring that UK applicants continue to be eligible, these applicants will cease to receive funding.”
EU contracts and proposals for tender have been modified to include a disclaimer informing companies and NGOs that “if the United Kingdom withdraws from the EU during the grant period without concluding an agreement with the EU ensuring in particular that British applicants continue to be eligible, you will cease to receive EU funding (while continuing, where possible, to participate) or be required to leave the project”.
Those already contracted to carry out EU work will not have their contracts terminated, although “modifications” may need to be made, the document adds.
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