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The UK’s contribution to the EU budget

As a member of the EU the UK made payments, or contributions, to the EU budget. The UK also received funding, or receipts, from the EU for various agricultural, social, economic development and competitiveness programmes.

The UK received a rebate from the EU which reduced its contribution. The rebate aimed to correct the issue of the UK making relatively large net contributions to the EU.

The UK formally left the EU on 31 January 2020. During the remaining 11 months of 2020 the UK participated in the EU Budget largely as if a Member State, as was agreed in a ‘financial settlement’ between the UK and EU.

In 2020 the UK made an estimated gross contribution (after the rebate) of £17.0 billion. The UK received £4.5 billion of public sector receipts from the EU, so the UK’s net public sector contribution to the EU was an estimated
£12.6 billion. The published figures don’t split the contribution between the month in which the UK was an EU Member State and the eleven months when it was in the transition period.

 UK's contribution to EU budget

There are different ways to measure the funds the UK received from the EU. The above figure of £4.5 billion includes only funding allocated to UK government to manage. However, the European Commission also allocates funding directly to UK organisations, often following a competitive process. In recent years these funds have been worth around £1.5 billion – £2.5 billion to the UK. Accounting for these receipts results in the UK making an average net contribution of around £7-7.5 billion per year between 2016 and 2019, rather than the £9.2 billion calculated by HM Treasury.

Brexit and the UK’s contribution to the EU

A financial settlement for the UK’s withdrawal

The UK and EU have some outstanding financial obligations to each other that they are settling through a ‘financial settlement’. The obligations arise from the UK’s participation in the EU budget and broader aspects of its EU membership.

The financial settlement sets out the financial commitments covered, the methodology for calculating the UK’s share and the payment schedule. Forecasts from the Office for Budget Responsibility and the Treasury suggest that the settlement will have cost around £30-35 billion once the final payment is made, possibly in the 2060s. The cost is uncertain and depends on future events, such as future exchange rates.

More detail is available in the Library briefing Brexit: the financial settlement.

Payments after leaving

The UK may continue to participate in some EU programmes, following the deal reached over the UK-EU future relationship (The UK-EU Trade and Cooperation Agreement). Such programmes include Horizon Europe, which is the EU’s research and innovation programme. If the UK does participate in any programmes, it will make a financial contribution. Any such payments are not part of the financial settlement.

The net contribution doesn’t measure the overall economic benefit/cost of EU membership

The UK’s net contribution shouldn’t be confused with an assessment of the overall economic benefit, or cost, to the UK of EU membership. The net contribution simply looks at the direct flows of contributions to the EU Budget from the UK and spending, or receipts, from the EU to the UK. It doesn’t, for instance, consider benefits to UK businesses from being in the EU’s single market. Several bodies have attempted an economic cost-benefit analysis of the UK’s EU membership, some of which are discussed in section 6 of the Library’s briefing In brief: UK-EU economic relations.

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