Six months to Brexit – cliff edge, rocky road, or sunny uplands for charities?

It’s getting to crunch time in the Brexit negotiations with just over six months left to settle the Withdrawal Agreement between the UK and the EU. Rhetoric around the negotiations is getting heated and the risk of a damaging and chaotic ‘no-deal’ Brexit is real. But who can say where we will end up? Forecasting seems nearly pointless, but it’s hard to see how any kind of Brexit won’t have on balance a negative impact on charities, and in particular on certain beneficiary groups and causes, at least in the near term. Uncertainty abounds, but we do know slightly more than we did a year ago. There’s good and bad news.

The Brexit dashboard is flashing red

Government has a pathetic track record when it comes to making sure that Brexit works for civil society or that it’s even considered at all. It was not among the 58 sectors that received a Brexit impact assessment. The Charity Finance Group (CFG) is tracking five specific policy areas including tax reform, EU funding, rules around state aid and procurement and the charity sector workforce. Their most recent ‘Brexit dashboard’ doesn’t look promising, with a lot of ‘flashing red lights’.  One ‘yellow’ light is  the future of EU funding, which we’ve learned more about recently.

Loss of EU funding for charities: a less steep cliff-edge

Last year, DSC published research on how much money is at stake and found that UK charities risk losing at least £258.4m in EU funds because of Brexit. The total figure is likely far higher but difficult to determine with available data. Government has given some assurances about what will happen to this funding after Exit day in March 2019, by underwriting  EU funded projects agreed before the UK leaves the EU. This ensures that ‘UK organisations, such as charities, businesses and universities, will continue to receive funding over a project’s lifetime if they successfully bid into EU-funded programmes before the end of 2020.’ It’s still subject to final negotiation but the Withdrawal Agreement from March 2018 would mean that the UK would continue to participate in funding programmes crucial to charities – such as the European Social Fund (ESF) and the European Regional Development Fund (ERDF) until they end in 2023. Any project signed off before 2020 will be funded for the duration of its run – which could be for example for three years from 2020- 2023.

In a ‘no-deal’ scenario, UK organisations would be unable to access further EU funding after Exit day, but the UK government  would fund the UK’s full allocation for structural and investment fund projects until the end of 2020. This guarantee includes successful bids directly to the European Commission – through projects like Horizon 2020. Government also wants to work with the Commission to ensure that UK organisations will be able to continue to participate in these awards after Exit day. Going forward, government will also underwrite successful bids where UK organisations are able to participate as a third country in competitive grant programmes from Exit day until the end of 2020. This is very recent progress, and good news.

Indirect effects and an uncertain funding future beyond Brexit

Despite these new revelations, we still don’t know much about how or if UK organisations can participate in  EU funding programmes beyond Brexit. UK charities are probably already being disadvantaged. Being invited on a funding bid with European partners or even leading a consortium will probably become harder. The European Commission has been accused of overreach by inserting ‘disclaimers in aid contracts warning UK NGOs that they will be dropped as a partner in programmes should Britain crash out of the EU next year’. This has potentially already disadvantaged UK-based NGOs.

Government wants to set up a UK Shared Prosperity Fund (UKSFP) to replace the various EU funding streams longer term, but this is developing at a glacial pace. A consultation on the new fund has been promised for later this year, and all communication around it so far has been tied to the Industrial Strategy. A recent report on the UKSPF by the APPG on Post-Brexit Funding for Nations, Regions and Local Areas also states that ‘nearly everything about the Fund is still to be worked out leaving huge unresolved issues’.

The UKSPF is intended to ‘tackle inequalities between communities […] by strengthening the foundations of productivity as set out in our modern Industrial Strategy’. Civil society can play a role in ensuring inclusive growth, but the focus on productivity could be dangerously limited.  Charities care about human, social, and environmental causes; wildlife, national parks and conservation projects, plus so much more that has nothing to do with Industrial Strategy. Getting into a job is crucial, but the wellbeing of individuals and communities is not only measured by economic indicators.

The mechanics of Brexit are only the beginning – what’s our role in healing a fractured society?

The way Brexit will impact local communities is still unknown, and will likely be diverse. But there are real risks that areas which have been worst-hit by austerity ‘are also highly exposed to changes in trade with the EU and any loss of regional funding’. 360Giving and the Young Foundation also found that ‘a lack of philanthropic funding is also a strong predictor for local authority areas voting to leave the EU. Remain areas not only tend to be less deprived but on average, they have also benefited from more funding and expenditure from philanthropic and public bodies.’ It’s possible that leave-supporting areas may ironically face greater challenges because of Brexit, but with less support – including from the charity sector. Charities and especially charitable foundations need to think carefully about how they address this issue, if they want to address social inequality, support social cohesion and reduce dangerous polarisation.