Brexit adjustment reserve

SUMMARY OF:

Regulation (EU) 2021/1755 on the Brexit adjustment reserve

WHAT IS THE AIM OF THE REGULATION?

The regulation:

establishes the Brexit adjustment reserve;
lays down its aims, budget and rules.

KEY POINTS

The reserve provides support for national measures introduced between 1 January 2020 and 31 December 2023:

to counter the adverse economic, social, territorial and environmental impact of the United Kingdom’s withdrawal from the European Union (EU);
for all EU Member States, regions, local communities and sectors negatively affected.

The budget for the fund is €5,470,435,000 (current prices) and will be disbursed in two allocation rounds. The first round (80%) will be activated in the form of pre-financing, paid in three instalments, the first of around €1.7 billion in 2021, followed by €1.3 billion by April 2022 and €1.3 billion by April 2023; the remaining amount of €1.1 billion will be paid in 2025 to reimburse eligible costs actually incurred and paid by Member States in implementing measures eligible for support.

Amending Regulation (EU) 2023/435 introduces the possibility of requesting transfer to the Recovery and Resilience Facility under certain conditions to address the energy crisis resulting from the impact of Russia’s war of aggression against Ukraine.

Eligibility criteria cover measures for, among others:

private and public businesses, especially small and medium-sized enterprises, the self-employed, local communities and organisations;
the economic sectors worst affected;
fishery-dependent businesses, regional and local communities and organisations;
job creation and protection, including green work, short-term work schemes, reskilling and training in affected sectors;
border, customs, sanitary, phytosanitary, security and fisheries controls, collection of indirect taxation, additional personnel, training and infrastructure;
product certification and authorisation;
communication, information and awareness-raising directed at citizens and businesses about changes to their rights and obligations;
the reintegration of EU and eligible UK citizens into the EU.

Allocation of the funding is based on the methodology set out in Annex I:

share of trade with the United Kingdom (€4,540,461,050);
value of fish caught in UK waters (€656,452,200);
population of maritime border regions with the United Kingdom (€273,521,750).

Member States that significantly depend on fisheries will have to direct a specific percentage of their national allocation to small-scale coastal fisheries and local and regional communities dependent on fishing activities.

Financial management rules state the following.

Payments are implemented under the shared management framework of the financial regulation (Regulation (EU, Euratom) 2018/1046).
The European Commission makes budgetary commitments* in instalments to each Member State between 1 January 2021 and 31 December 2023.
Each Member State submits an application for the 2025 provisionally allocated amount by 30 September 2024.
Applications for finance from the fund are submitted on a template provided in Annex II and include information on total public expenditure.
Requests for funding are accompanied by an implementation report setting out the:
- negative policy and geographical impact of Brexit;
- measures taken to counter the adverse consequences;
- justification for the eligibility expenditure incurred and paid and its direct link to the withdrawal of the United Kingdom from the EU;
- arrangements to avoid double funding and ensure the support dovetails with other EU policies and financing;
- description of the measures’ contribution to climate change mitigation and adaptation.
The Commission:
- ensures the application is complete, accurate and true;
- establishes the amounts for eligible expenditure and technical assistance.
All amounts are denominated in euro.

Management and control rules require:

Member States to:
- take all necessary legislative, regulatory and administrative measures to protect the EU’s financial interests,
- appoint a body to manage financial contributions from the fund,
- set up management and control systems according to the template in Annex III,
- prevent, detect and correct irregularities and fraud and avoid conflicts of interest,
- cooperate with the Commission, the European Anti-Fraud Office (OLAF) and the European Court of Auditors;
bodies managing the financial contributions to:
- ensure the functioning of an effective and efficient internal control system,
- apply clear rules on project selection, electronic accounting systems and retention of documents for 5 years;
the Commission to:
- carry out on-the-spot audits and have access to relevant documents,
- identify any risks in national management and control systems;
financial corrections by Member States once an irregularity is discovered.

Under information and communication rules, Member States and their regional and local authorities are responsible for informing the public of the results and impact of the EU funding.

Evaluation and reporting measures require the Commission to:

inform the European Parliament and the Council of the European Union about the implementation of the regulation by June 2024;
evaluate the effectiveness, efficiency, relevance, coherence and EU added value of the funding by 30 June 2027;
submit to the Parliament, Council, European Economic and Social Committee and European Committee of the Regions a report on the implementation of the fund by 30 June 2028.

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 9 October 2021.

BACKGROUND

The fund is a special one-off emergency initiative to respond to the unprecedented withdrawal of a Member State from the EU. The impact will affect the whole EU, but some Member States, regions, local communities and sectors will be more affected than others.
The fund supports public and private businesses facing disrupted trade flows, including new costs for custom checks and administrative procedures.
For further information, see:
- Brexit adjustment reserve (European Commission).

KEY TERMS

Budgetary commitments. A reservation of appropriations to cover for subsequent expenditure.

MAIN DOCUMENT

Regulation (EU) 2021/1755 of the European Parliament and of the Council of 6 October 2021 establishing the Brexit Adjustment Reserve (OJ L 357, 8.10.2021, pp. 1–26).

Successive amendments to Regulation (EU) 2021/1755 have been incorporated in the original text. This consolidated version is of documentary value only.