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IFG - New report reveals the cost of Brexit

In the six government departments most affected by Brexit, preparations for leaving the EU will cost at least £400 million in the 2017/18 financial year. The cost will jump to at least £900 million in 2018/19 – but the full cost of Brexit will not be clear for some time, says a new report.

Published by the Institute for Government, Costing Brexit looks at what Whitehall is spending on leaving the EU. It analyses spending by the Department for Exiting the EU (DExEU), the Department for International Trade (DIT), the Department for Business, Energy and Industrial Strategy (BEIS), the Department for Environment, Food and Rural Affairs (Defra), the Home Office and Her Majesty’s Revenue and Customs (HMRC).

The Treasury has already shared £250 million among departments in 2017/18, and set aside a further £3 billion to fund Brexit over the next two years. But the report estimates that at least £400 million has been spent on Brexit already, in these six departments alone.

By March 2019, when Article 50 expires, the report estimates the Government will have spent at least £1.3 billion across these key departments. But the total across government could reach £2 billion when other departments are included.

The report finds that Brexit preparations have considerably increased the number of civil servants.  For Defra, Home Office and HMRC, Brexit will effectively reverse the reductions in the size of the civil service since 2010. In fact, half of the money spent on Brexit so far has gone on new staff.

The report also finds:

  • Defra has seen the largest increase in its spending, with almost £100m approved by the Treasury for its EU exit work in 2017/18. Staff numbers have gone up by 65% since June 2016.
  • HMRC, which will play a critical role in preparing the border for Brexit, expects to need up to £450m for 2018/19 alone.
  • The Home Office is using around 50% more agency staff per month now than it was before the referendum. If this continues, the department will spend almost £40 million more on agency staff in 2017/18 than it did in the year leading up to the referendum.
  • The six departments have already signed contracts worth £5.5 million with consultancy firms.

Jill Rutter, Brexit programme director at the Institute for Government, said:

“We look only at costs incurred ahead of the UK’s formal exit from the European Union. But the true scale of those costs will not be clear until the future relationship starts to take shape. Details still to be determined, like the UK’s relationship with EU regulators or its access to EU-wide customs systems, will affect the scale of the task in Whitehall – and the size of bill for delivering it.”

Joe Owen, senior researcher, said:

“Brexit will have a big impact on the size and shape of Whitehall departments, as well as their budgets. If the UK fails to negotiate the access to EU regulators that the Prime Minister wants, costs are likely to grow again – new arm’s length bodies and new border functions will need to be put in place.”

Notes to editors

  • The full report is available online.
  • This analysis relies on data, reports or information released by government. All assumptions are included in the text and referenced in endnotes and the technical annex.
  • These costs reflect only the administrative costs incurred by Whitehall departments. They do not reflect the financial settlement agreed as part of the withdrawal negotiations, nor any other saving or costs anticipated.
  • The Institute for Government is an independent think tank that works to make government more effective.
  • For more information, please contact / 0785 031 3791.
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