Billions in business funding blocked days after Brexit vote

Jul 26, 2016

Government 'pauses' EU-backed schemes while it considers if it can afford to match development fund money

Oli Scarff/AFP/Getty Images

Chief Secretary to the Treasury David Gauke

Page 1 of 31Billions in business funding blocked days after Brexit vote

Schemes worth billions of pounds to support businesses and economic growth across the UK were put on hold just days after the EU referendum result, it has been reported.

Businesses have complained that investment programmes already in advanced stages of development have been abruptly halted, a move The Independent says "exposes the almost immediate impact of Brexit on the UK economy".

A scheme that would have provided around £3.7m to more than 600 technology startups in London is now said to be on "indefinite" hiatus, despite being expected to be fully signed in mid-July, says the paper.

Elsewhere, there is doubt over more than £500m in debt and equity finance to support businesses in the north-east and Yorkshire, including money from EU development funds and the European Investment Bank, says the Financial Times.

The BBC reported earlier this month that as much as £285m in EU funding, worth around £570m with a UK government contribution, earmarked for projects in Greater Manchester is now under threat.

The problem, it appears, is that EU development funds must be at least matched by the UK government and the public purse is expected to come under pressure due to Brexit uncertainty.

Professor Iain Begg, a research fellow at the London School of Economics, said any delay to the payment of funds would not come from Brussels, as the UK remained entitled to funds all the while it is still an EU member state. 

He added: "I suspect it would be for austerity-type reasons rather than anything at the [European] commission level."

Having initially said there would be no "immediate change" to EU-supported regional funding, the government has since said this applies only to those schemes that are already fully signed off.

So far, around 20 per cent of approximately £3bn in funding from the European Regional Development Fund that was allocated for the UK has been finally allocated, leaving about £2.5bn, or £5bn worth of projects, potentially subject to the suspension.

David Gauke, the chief secretary to the Treasury, told parliament this week that ministers "will be making an announcement in the not-too-distant future", making this one of the first important decisions for the new Chancellor, Philip Hammond. 

City of London will keep 'passporting' rights, says Boris Johnson

25 July

Britain's new Foreign Secretary has insisted that a deal will be renegotiated with the EU that allows the City's financial firms to "passport" into the European single market.

Speaking to journalists during his first official visit to the US in his new role, Boris Johnson was asked whether the freedom to trade across the bloc, a critical factor in the rise of London as the world's preeminent financial centre, would be maintained.

Reuters reports that he responded simply: "I do, I do".

The former London mayor cited the strong trade that currently exists between EU countries and the UK, which boasts the fifth largest economy in the world, and said it was "very much in the interest of both parties to keep those flows going".

A key obstacle to the UK retaining access to the single market in any form is the insistence that to do so it would have to accept the four founding freedoms of the EU, including that of movement.

This pledge appears politically incompatible with the Brexit vote which was partly driven by a desire for the UK to take back control of its borders. But Johnson says he is in "no doubt" a compromise can be reached, describing himself as "very encouraged" by the conversations he's had with "other European colleagues" over the past week.

Passporting, as it's known, is the single market right to be based in one country of either the EU or the wider European Economic Area and trade across the entire 31-country bloc without the need to comply with individual regulations in each country.

It is often cited as a key benefit to Wall Street banking giants and other major financial players that make London their base. The UK capital offers language and regulatory continuity and ultra-liquid markets, as well as access to the largest collective economy in the world.

"If the banking passport is no longer available to British-based firms, then some operations would clearly have to shift to a location inside the EEA," notes the BBC.

Some firms could even choose to move their formal headquarters and "centre of gravity" to the continent. Before the referendum there were warnings that tens of thousands of jobs in a sector that is the single biggest contributor to UK economic growth could be lost.

Page 1 of 31Billions in business funding blocked days after Brexit vote

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