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The Negative Effects of a No-deal Brexit on British NGOs
September 10, 2019
October 31st is right around the corner and as discussions are still ongoing between Parliament and Office about the UK’s agreement to leave the European Union, the no-deal Brexit is an outcome for all to consider.
A no-deal Brexit is something that can potentially affect people, business and institutions alike, and the British NGO sector is not excluded!
We are still unaware of what the negative effects of a No-deal Brexit on British NGOs could be.
As the no-deal scenario remains a possibility, British NGOs are unsure of what will happen to funding, employees and donations.
Britain has one of the largest groups of humanitarian aid workers and donors in the world, and is the second largest recipient of EU Aid to Civil Society Organizations (CSOs).
According to EU data, in 2017 British NGOs secured €228 million in new grants from the EU’s humanitarian arm (ECHO)’s budget of €2.5 billion.
From the budget, UK NGOs received €214 million (28% of all NGO allocations).
If the UK leaves the EU with a deal, British NGOs have a better possibility to have access to ECHOs budget and agreements on employment. On the other hand, if the UK decides to leave the EU with no deal, the scenario could be very different.
So, what should British NGOs be aware of?
Access to EU Funding
Currently, the UK is a strong collaborator in the NGO sector and a recipient of European Community of Humanitarian Aid Office (ECHO) funding.
Every year, ECHO-funded projects affect almost 120 million people in 90 countries, and together with the aid given by each member of the EU, it is the largest aid donor in the world.
In the event of a no deal, the greater risk is that ECHO could cut any funding to British NGOs.
According to the UK Aid minister Penny Mordaunt, UK NGOs have already selected a smaller number of ECHO grants, mainly because the contracts last year demanded proof that British NGOs could continue funding a programme in the event of a no-deal Brexit.
In 2017, a study guided by Bond determined that if the EU stops funding, UK CSOs are most likely to face an annual funding shortfall as high as €356.9 million per year. According this issue, a recent letter written by Secretary Alok Sharma from the Department for International Development (DFID) confirmed that in case of a no deal Brexit, the government is committed to fill the gap in any signed contracts with ECHO that are at risk of having their funding terminated.
For that to be done, DFID encourages organizations to apply before October 31stthis year.
If you want your NGO to apply, you can do it here.
On other news, in last week’s UK government Spending Round, Chancellor Sajid Javid announced that the UK will continue with its commitment on spending 0.7% of national income on overseas aid.
Also, the announcement included a 1.5% increase in the DFID resource budget for 2020-21, together with other budgets for projects that help refugees, climate, capacity building, etc. While many organisations are questioning how this aid will be spent, the uncertainty of a no deal leave still endangers important amounts of EU funding for British NGOs.
Deal or no deal, after Brexit, the UK will still be a member of the Organization for Economic Cooperation and Development (OECD).
Because of that, UK CSOs will still be eligible to apply for external EU funds such as the work with “Least Developed Countries” (LDCs) and “Heavily Indebted Poor Countries” (HIPCs).
Until this day, the UK pays around £1.5 billion a year into the EU’s development and humanitarian aid budgets.
Since Britain is legally obliged to maintain the same level of aid spending, it would leave the UK with an extra £1.5 billion that must be spent on aid.
The government has shown interest into continuing to give funding to the EU, but the question is how and if there is going to be negotiation to make this happen.
What will occur in funding for next years to come, is still uncertain.
Risk Management Assessment for currency fluctuations
As the UK government insists on leaving the EU even without a deal, the pound’s value continues to fall and further volatility is expected, according to experts.
This could potentially have a great impact on British NGOs because if the pound value fluctuates, donors could potentially struggle to commit in a larger scale or in long-term programmes.
If the pound continues to decrease, it is likely that UK aid CSOs will have to reduce their number in aid work as well.
According to Bond, NGOs can reduce this risks by what financial institutions call “hedging” or a “forward contract”, which in simple words means that NGOs invest in the protection of their finances from risky situation.
This could be done to minimize the chance that their assets could lose value, for example to secure an amount of currency at a specific value.
This kind of risk management planning involves the help of experts, which is commonly available in larger and experienced organizations.
But, medium or small size UK NGOs do not generally invest in this sort of assessment, therefore making them more likely to be affected.
Ensure that your EU national employees apply to the Settled Status Scheme
As the Institute for Public Policy Research states, over 80% of EU nationals currently working in the NGO sector would be ineligible to work in the UK post-Brexit under current migration proposals.
If your NGO has European employees based in the UK, it is important that they apply to the “Settled Status Scheme”, so that they can continue living in the UK after 30 June 2021.
However, if the UK leaves without a deal, the deadline for applying for either a settled or pre-settled status will be 31 December 2020. More information is available in https://www.gov.uk/settled-status-eu-citizens-families
On the other hand, if the UK leaved the EU with no deal, British nationals who work for European NGOs can also be affected by the possibility of having to pay Visas, which means costs, bureaucracy and delays.
Always be aware of the official information
Lastly, it is important that British NGOs are informed with the best sources.It is recommended to keep updated not only with the press but with the Government’s official information about how to prepare for Brexit and the specific guidance for CSOs from the Charity Commission and Office for Civil Society.
Written by Gabriela Hagedorn
Marketing and Communications Intern
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