Brexit in Wales – EU funding, research and Investment

This week, the External Affairs and Additional Legislation Committee focused their attention on EU funding, research and investment and the implications for Wales. You can watch the full session on Senedd.TV .

The objectives of this session were to consider:

  • the implications for Wales of Brexit on access to key EU funding sources;
  • the potential impact of Brexit more broadly on Welsh Higher Education;
  • to understand the potential implications and impact of Brexit on access to finance for key infrastructure developments in Wales.

You can follow the discussions on Twitter and Facebook using #BrexitinWales.  To keep up to date on the work of the Committee follow @SeneddEAAL.

Update

On 2 October the Prime Minister made a speech on Brexit at the Tory Party conference, covering a number of issues:

  • Article 50: the UK Government will trigger this no later than the end of March 2017. It will not consult the Houses of Parliament in doing this, asserting the right of royal prerogative, and that the UK Government will defend this position in the courts.
  • Great Repeal Bill: to be presented in the next Queen’s Speech, the Bill will remove the European Communities Act 1972 from the statute book and enshrine all existing EU law into British law.
  • Control over immigration: the UK will decide on its own immigration rules post-Brexit.
  • Workers’ rights: the Prime Minister gave a commitment to preserve existing workers’ rights enshrined under EU law and to further enhance these.
  • No opt-outs, one United Kingdom: the Brexit negotiations will be undertaken as the UK and the UK will as one United Kingdom – there is no opt-out for Brexit and the Prime Minister stated ‘I will never allow divisive nationalists to undermine the precious union between the four nations of our United Kingdom’.
  • No replica model: negotiations with the EU will not be about copying another model – Norway model or Switzerland model. It is going to be an agreement between an independent, sovereign United Kingdom and the European Union. The focus will be on free trade, in goods and services aimed at giving British companies the maximum freedom to trade with and operate in the single market – and let European businesses do the same in the UK.

EU funding

Wales continues to be eligible to participate in EU programmes and access EU finance until the UK formally leaves the EU. Wales currently receives a considerable amount of funding from the EU.

The Wales Governance Centre published research ahead of the EU Referendum that suggests that Wales – in contrast to the UK as a whole – is a net beneficiary of EU funds.

These are some of the most relevant sources of EU funding to Wales:

  • Structural Funds: under the 2014 – 2020 round Wales has been allocated almost £2 billion from the EU – with £1.6 billion going to West Wales and the Valleys and over £325 million to East Wales.
  • Common Agricultural Policy (CAP): under the 2014 – 2020 round Wales receives around £250 million of funding each year in direct payments to farmers in addition to €355m million for its 2014 – 2020 rural development programme.
  • Horizon 2020: is the EU’s programme to support research and development and innovation. Up to May 2016 Wales has secured around €45 million from Horizon 2020 for 95 projects, including around €10 million for the COFUND initiative, with Welsh Higher Education accounting for around €28.5 million of this total.
  • Erasmus+: the EUs programme to support mobility in the field of education and training. This includes mobility in higher education for students and staff, which is a high priority for Welsh universities. It also includes mobility in other forms of education: further education, vocational training, and school education, as well as youth engagement, areas where Wales has traditionally been actively involved.

Accessing EU funding

Given non-EU Member States take part in a range of EU programmes, there will be strong interest in the negotiations in considering (i) whether the UK Government will prioritise continued participation in EU programmes beyond Brexit and (ii) if it does, which areas will be on its priority list.

The role of the Welsh Government and the Assembly in identifying which programmes would be of most interest to Welsh stakeholders and lobbying the UK Government to prioritise these in its negotiations is something to be considered.

What we can be certain about is that Wales will not be able to receive support from the regionally managed Structural Funds programmes nor the Common Agricultural Policy (including the Rural Development Programme).

UK Government: EU funding guarantee update

On 3 October the UK Chancellor Philip Hammond MP published an updated UK Government guarantee to support projects receiving funding under the current round of EU programmes.

The October statement extended the original deadline to ‘the point at which the UK leaves the EU’, following pressure from the Devolved Administrations, including the Welsh Government for the deadline to be extended.

The October statement confirms that the UK Government will:

  • Guarantee EU funding for structural and investment fund projects, including agri-environment schemes, signed after the Autumn Statement and which continue after we have left the EU.
  • These conditions will be applied in such a way that the current pipeline of committed projects are not disrupted, including agri-environment schemes due to begin this January.
  • Where the devolved administrations sign up to structural and investment fund projects under their current EU budget allocation prior to Brexit, the government will ensure they are funded to meet these commitments.

The specific references to agri-environment schemes due to begin in January alleviates the concerns expressed by the Welsh Government about the uncertainty around funding for these.

Higher Education

There is consistent support from the Welsh HE sector for continued participation in Horizon 2020 and Erasmus+. Both are viewed as important elements of the international and outward looking approach of the sector. The ability of academics to move posts freely within the EU was also valued highly.

The Welsh HE sector has consistently over recent years highlighted the under-funding of research capacity in Wales as a significant barrier to Welsh success in Horizon 2020. In 2015 the Leadership Foundation published a report which states there is a shortage of around 600 researchers in Wales.

Welsh HE has underlined the importance of EU funding to the sector, with EU Structural Funds being viewed as an important source to help ‘fill’ the funding gap, and to enable key investments that otherwise wouldn’t have taken place. The Swansea Bay Science Campus is a good example of this, combining EU Structural Funds with European Investment Bank finance, and is covered in further detail below in the section on EU investment in Wales.

EU students and Welsh HE

The Higher Education Statistics Authority (HESA) data shows a total of 7,095 EU national students were enrolled at Welsh universities in 2013/14 (a 4% increase from 2012/13). The majority came from Germany (18%), France (13%), UK EU-domiciled (11%) Spain and Ireland (8% each), Greece (7%), Poland (6%), Italy and Bulgaria (4% each), and Romania (3%).

In terms of the most popular subjects for EU students in Wales, enrolments were as follows:

  • Business & management -1,105
  • Humanities – 1,691
  • Engineering & technology – 988
  • Science – 926
  • Social sciences – 688

It is estimated that EU students currently provide at least £24m to Welsh universities and the overall impact to Wales attributable to income from EU students was £47m. An EU student studying in Wales on average generates £19.7k for Wales and 0.19 Full-time Equivalent jobs. Additional impact is also generated in the rest of the UK from students studying in Wales. These are likely to be a conservative estimate according to Higher Education Funding Council for Wales.

EU Investment in Wales

The European Investment Bank (EIB) is the European Union’s bank, owned by and representing the interests of the Member States. The UK owns a 16% share: the same as Italy, France and Germany. Although the EIB does invest outside the EU, 90% of loans are made within the Union.

Over the previous decade the EIB has directly invested nearly £2 billion in Wales. The EIB describes current EIB lending in the UK as being “at record levels and supporting a more diverse range of projects than many other EU countries”.

Following a departure from the EU, legal obligations concerning EIB loans already agreed in the UK would not change. However, Article 308 of the TFEU states that Members of the European Investment Bank “shall” (i.e. must) be Member States. Leaving the EU, therefore, would mean the UK would no longer be a member of the EIB.

The EIB is another source of finance to which organisations in Wales are eligible to apply for support. A number of projects were successful during the Fourth Assembly including the Science and Innovation Bay Campus at Swansea University (see below), officially opened in October 2015, which received €60m investment from the EIB. The Welsh Government submitted a number of project ideas for support under the European Fund for Structural Investment, managed by the EIB, during 2015, including the South Wales Metro project.

EU funding in Wales following Brexit  

It is not necessarily the case that leaving the European Union would result in either an end to the UK contributing to the EU budget, or receiving funding from it. As discussed in the previous blog on alternative models to EU membership, countries outside the EU that currently have a high degree of access to the Single Market (such as Norway and Switzerland) contribute to the EU budget and enjoy some level of participation in EU funding streams.

The European Economic Area Agreement ensures participation by Iceland, Liechtenstein and Norway in a number of EU programmes, including Horizon 2020 (research and innovation) and Erasmus + (education and training). Although EEA members are not generally eligible for European Structural Funding, Norway and Liechtenstein qualify for some cross-border and transnational programmes. No non-EU countries are currently part of the CAP.

Fundamentally, the UK’s future access to EU funding programmes – both for the current programming period (2014-2020) and beyond – will be subject to negotiations during the withdrawal process.

Next steps

Next week on 10 October, the Committee will be looking into the implications for Wales in relation to agriculture and fisheries. The National Assembly for Wales’s Climate Change, Environment and Rural Affairs Committee are also looking at these implications. You can contribute your ideas on how to address the implications on their online dialogue page.

You can read more about the implications for Wales by the National Assembly for Wales’s Research Team or catch-up on our previous blogs on international law and trade and developments to date.

You can follow the discussions on Twitter and Facebook using #BrexitinWales.  To keep up to date on the work of the Committee follow @SeneddEAAL.

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