According to reports in the Telegraph newspaper and widely confirmed elsewhere over the course of the past week or so, a tentative agreement has been found between the UK and the EU over the amount that the former should pay in the form of a ‘divorce bill’.
The negotiations on the amount have been ongoing for months. December however sees a European Council meeting that could be the key to opening up the discussion to how the UK will trade with the EU once Brexit is complete and an agreement on the amount that the UK would pay was necessary for such progression to occur.
How much to pay though?
Brexit campaigners were keen to not pay the EU anything as and when Brexit occurred but such a view has now been largely silenced. The EU wants the UK to pay its full share of what it had previously agreed to in the long-term budget.
By March 2019 that overall figure, including outstanding liabilities such as pensions due to staff members of the European Parliament would come to a little over EUR665bn. The UK contributes currently 13% of the EU budget, the 3rd most after Germany and France, and that would bring the ‘bill’ to a figure of EU86.4bn.
UK negotiators have been trying to reduce this number by arguing that elements of the budget are no longer valid and that the weakness of the pound reduces the amount they can pay to a budget denominated in euros. There is a lesson in hedging in there somewhere!
Such bargaining and horse trading has allowed the figure to fall to somewhere around the EUR60bn mark according to the reports made this week. A lunch taking place on December 4th between UK Prime Minister May and the European President Donald Tusk is not expected to outline a definitive number and given the length in time over which such a payment will be made and the varying value of sterling over what will amount to be many years, no true cost is likely to be known.