Brexit looms: 6 things for NGOs to consider
21 August 2019
The UK’s agreed date to leave the European Union on 31 October 2019 is fast approaching. A no deal Brexit is still hanging over us, and as each day passes the risk of a cliff-edge Brexit increases.
The draft withdrawal gives the UK — and UK civil society organisations (CSOs) — two years to adjust to the deal and agree on a future relationship with the EU. If the UK leaves without a deal, this agreement will no longer hold.
UK NGOs are facing a lot of uncertainty. Here are some things to consider regarding how Brexit might affect your work in international development.
1. Changes in the UK’s policy influence
UK CSOs have traditionally had a strong and powerful voice in policy and advocacy. Like the UK government, they have been an effective influencing force at the European level, promoting a progressive development agenda with like-minded countries.
If UK organisations aren’t able to continue advocating at the European level, there will be a serious gap in capacity and resource for development cooperation in the EU.
Coordination among EU donors is likely to be weakened too, since the UK will become a lone government, no longer party to common EU positions, groupings, etc. UK CSOs (and UK media, academics, politicians, public representatives, etc.) will, as a consequence, be in the same position, unable to co-ordinate and co-strategize with EU allies to influence EU policy positions.
UK CSOs have been at the forefront of many of the global civil society-led campaigns, for example: Jubilee 2000, and trade, climate, and tax justice campaigns. Brexit should not negatively impact on UK CSOs’ ability to drive ambitious global campaigns.
2. Currency fluctuations
Since the referendum in June 2016, the pound’s value against major currencies, such as the Euro and US Dollar, has fallen by as much as 19%, all of which has a major impact on the spending power of UK CSOs.
Donors will find it more difficult to commit to larger-scale, long-term programmes if the cash value of the pound is volatile. If the pound remains low, UK humanitarian organisations – some of the biggest and most experienced in the world – will also have to reduce the numbers in humanitarian need who they can support.
Some of these risks can be reduced by what financial institutions call “hedging” or a “forward contract” (securing an amount of currency at a specific value, to smooth out fluctuations in exchange rate and provide certainty in terms of upfront costs). However, this only tends to work with the major traded currencies, and not, for example, with the Bangladeshi taka or Kenyan shilling.
This kind of complex risk management requires dedicated expertise, which is usually only available to larger organisations. CSOs should review their choice of payment providers. High street banks are not adequate and specialist service providers are differ significantly, with some offering distinctly better rates and services than others.
The reduction in the value of sterling also increase the cost of imports from poorest countries and reduces the value of aid, investment and remittances.
3. Access to EU funding
The UK is the second largest recipient of EU aid to CSOs of both grants and service contracts. Between 2012-16, EU development and humanitarian aid to UK CSOs amounted to an average of €300million in fresh commitments each year. In 2017, Bond published a study on the Impact of Brexit on EU funding for UK CSOs, which highlighted that UK CSOs are likely to face an annual funding shortfall as high as €356.9million per year.
In March 2019, DfID confirmed that it will underwrite UK-based INGOs’ EU contracts in the event of a no deal Brexit. Alok Sharma’s letter on Friday again encouraged organisations to apply for DfID’s financial assurance for any new programmes before 31 October. Sign up to the Bond EU Funding Group to get updates on this.
4. Employing EU nationals
According to research by the Institute for Public Policy Research (IPPR), over 80% of EU nationals currently working in the charity sector would be ineligible to work in the UK post-Brexit under current migration proposals. NGOs will need to ensure that their current EU staff based in the UK apply for the “settled status scheme” and adjust future recruitment processes to take this into account.
Organisations should familiarise themselves with the Home Office guidance which is constantly being updated. The deadline for applications for EU citizens to apply for the settled status scheme will be 30 June 2021, if the UK secures a withdrawal deal with the EU. If the UK leaves without a deal, the deadline for applying will be 31 December 2020.
Brexit may require UK nationals working for CSOs to pay for visas to EU countries, which means additional costs, bureaucracy and delays.
6. The UK government’s official guidance
Leaving the EU will impact CSOs, individuals and businesses. The government has created an interactive tool where you can find all its information on how to prepare for Brexit. There is also specific guidance for CSOs from the Charity Commission and Office for Civil Society.
Last Friday, international development secretary Alok Sharma wrote a letter to civil society organisations about the government’s planning for Brexit, although the letter presented no new information.
Join our Brexit space to hear more about the latest developments.