Managing the impact of Brexit on EU Structural funds

The Auditor General for Wales published his report on Managing the impact of Brexit on EU Structural funds in August 2018.

The Welsh European Funding Office (WEFO) faced a major challenge to commit all EU structural funds before Brexit. However, shortly before the publication of the Auditor General’s report, the UK Government extended its guarantee to cover Wales’ (and the UK’s) allocation for Structural Funds under this EU budget period to 2020.

The UK left the EU on 31 January 2020.

In light of Brexit and the previous terms of the UK Government guarantee, WEFO was aiming to commit all of the £2.1 billion EU Structural Funds by March 2019. But, it recognised that doing so was challenging. There is a significant risk that some projects in WEFO’s pipeline will not get through the approval stages. Other factors affecting WEFO’s ability to commit funding include uncertainty about Brexit, exchange rate volatility and changes in the economic environment. Under the previous terms of the guarantee, for every 1% of EU Structural Funds that are not committed before Brexit, Wales stood to lose around £21 million.

The UK Government’s decision to extend the guarantee to cover Wales’ allocation for Structural Funding under this budget period to 2020 means it is now less important that WEFO commits all of Wales’ funding by March 2019. The precise impact of the extended guarantee is being discussed and the UK Government intends to issue new guidance shortly.
The report found that WEFO has maintained robust checks and balances, despite the intention to increase the pace of project approvals and spending ahead of Brexit. It has strengthened its approach to approving projects and only commits to those which meet strict criteria and match its strategic priorities.

It is not yet clear what will replace structural funds post-Brexit, but WEFO and the Welsh Government more widely, are trying to shape debate. The UK Government intends to introduce a Shared Prosperity Fund but it has not set out key details about the value of the fund or how it will operate. The Welsh Government has set out its vision for the future of regional investment and wants full control and funding to be devolved.
The report identifies 7 key issues for the Welsh European Funding Office and the Welsh Government to manage. These include the need to consider how to retain WEFO’s skills and experiences in light of any post-Brexit replacement for EU structural funds.

The Public Accounts Committee noted the report during autumn 2018 and wrote to the External Affairs and Additional Learning Committee advising of the Report’s publication.

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Status: Complete

First published: 16/08/2018