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How Much Will the UK Pay the EU After Brexit?

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It’s shaping up to be one of the most expensive divorces in history, but this breakup involves countries, not celebrities. New reports have emerged that the UK is willing to pay a £36 billion divorce bill to the EU in an effort to reinvigorate stalled Brexit talks. UK government officials are playing down the possibility of paying the high price tag, but according to EU representatives, if they want to keep negotiations going, they’re going to have to pay up.

Effort to Move Talks

Brexit negotiations have stagnated in recent weeks, forcing some to speculate that the UK is prepared to pay the large sum, equalling €40 billion, to move things along and help discussions about a future trade deal. According to sources, the EU won’t move on to the next stage of talks until “significant progress” has been made on the financial settlement. Discussions are scheduled to resume in October, but that is likely to get pushed to December if payment isn’t finalized. That’s bad news for the UK, which is on a tight schedule to work through all the Brexit issues.

The large payment is being spread and supported by the EU. The EU Budget Commissioner told a German newspaper that the UK would have to keep making payments on long-term EU programs through 2020. Britain’s exit will mean the EU gets around €10 billion to €12 billion less each year. To compensate for the loss, a number of solutions have been suggested, including cutting the budget or increasing corporate taxes for member countries.

UK leaving the EU

However, the payment is far from a done deal. Downing Street officials have tried to squash any rumors of a “divorce payment”, with one official saying that reports of the UK paying €10 billion every year for up to three years were “highly speculative and wrong.” According to government officials, paying such a high price would be unacceptable to politicians and Brexit voters. Though the rumored price is high, it’s actually less than the EU would like. According to some sources, the EU would like €60 billion for budget payments and negotiations; however, the UK’s bottom line is closer to €30 billion, leading many to think the actual amount paid will be around €40 billion. The money would help break through deadlocked discussions and be a fair settlement of the UK’s “rights and obligations” to the EU.

A series of positioning papers on the UK’s stance on customs and border issues will be released in the coming weeks to detail how the UK plans to transition out of the EU, and Theresa May is expected to give a speech towards the end of the summer with more details and a potential offer to the EU.

Payment Backlash

Brexit Divorce is Happening

News of a potential payment didn’t sit well with Conservatives who think the UK shouldn’t be required to pay such a large amount, if anything at all. According to Conservative MP Peter Bone, the £36 billion Brexit fee won’t likely make it through Parliament.

“One of the prime reasons the UK voted to leave the EU was to stop sending them billions of pounds per year, so it would be totally bizarre to give the EU any money, let alone £36 billion, given also that over the years that we have been in the EU or its predecessor we have given them, net, over £200 billion,” he said. “So if there was going to be any transfer of money then it should be from the EU to the UK.”

Other Conservatives have pointed out that legally, the UK doesn’t owe the EU anything, although there isn’t any precedence in the situation.

With deadlocked talks and a large sum of money hanging in the balance, the decision of the divorce payment could have large effects on how Brexit pays out. It seems that sooner or later one side will have to give in to the other.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.