On 26^th December 2020, the European Commission put forward its proposal for a Brexit Adjustment Reserve. As the UK leaves the European Union there are, and will be, implications on businesses, economic sectors, workers, regions and local communities. The Reserve is set up to help mitigate the adverse consequences in Member States and sectors that are worst affected by Brexit. This special instrument will have a maximum resource of €5 billion in 2018 prices and will be separate from the EU Multiannual Financial Framework 2021-2027.

Objective:

This proposed special fund is designed to exclusively deal with the adverse effects of the withdrawal of the United Kingdom from the Union in Member States, regions and sectors, in particular those that are worst affected by Brexit. It should be used on actions that mitigate the impact of Brexit on the economic, social and territorial cohesion.

Who is eligible?

All EU Member States are eligible for funding. The Reserve is designed to be rapid and flexible, and to concentrate on the regions and sectors worst affected by Brexit.

Funding allocation and Scope:

The maximum budget for the Reserve is €5 billion (in 2018 constant prices). The Commission proposes that the funds be allocated in 2 rounds: a larger portion (around €4,244 bn) will be allocated in 2021 as pre-financing; the remaining funds (around €1,126 bn) will be for additional contributions in 2024.

Pre-financing allocation is proposed to take into account two conditions:

• Trade intensity – the importance of the Member State’s trade with the UK
• Reliance on UK water for fisheries – the importance to the Member State of fisheries in the UK exclusive economic zone.

The period of eligibility for direct public expenditure runs for 30 months, from 1 July 2020 to 31 December 2022. The Reserve will support expenditures that assist:

• Businesses and local communities adversely affected by the withdrawal
• Vulnerable economic sectors
• Fishing communities
• Employment and re-skilling
• Functioning of the border, customs, sanitary, phytosanitary and security controls
• Certification and authorisation regimes
• Communications and awareness-raising for citizens and businesses.

Member States have to set up management and control systems and appoint bodies responsible for the management of the Reserve. The European Commission suggests that for simplification reasons, Member States could use bodies managing cohesion policy funding or the European Union Solidarity Fund. Member States will have to submit an implementation report by 30 September 2023 detailing the supported actions and expenditures paid during the eligibility timeframe, as well as present output indicators.

Next steps:

The proposal is subject to negotiations and will have to be adopted by the Parliament and the Council.

Further reading:

Click here to read the Brexit Adjustment Reserve proposal text and annexes.

Click here for a Q&A on the Brexit Adjustment Reserve proposal.

Featured image source: EC – Audiovisual Service