• Pat Sweet Reporter, CCH Daily and Accountancy

Brexit exit bill could top £2bn

The government has already spent £400m on Brexit preparations and the final bill for getting ready for leaving the EU could top £2bn, according to research from the think tank the Institute for Government (IfG)

IfG calculates these six departments will have spent approximately £400m on Brexit by the end of 2017/18. Defra has seen the largest increase in its spending, with almost £100m approved by the Treasury for its EU exit work.

That total exceeds the Treasury’s Whitehall-wide allocation of £250m for 2017/18 by £150m. That is because the Chancellor’s figure does not include the Brexit money allocated to DExEU and DIT over the Parliament in the 2016 Autumn Statement, or the additional money these departments are spending by reallocating their budgets internally.

The think tank says the cost of Brexit in the year running up to the UK’s formal exit is likely to increase significantly. HMRC, which will play a critical role in preparing the border for Brexit, expects it will need between £300m and £450m for 2018/19 alone.

IfG reckons the six departments will require around £900m for work on EU exit in 2018/19, and says over two years the expected cost of Brexit is about £1.3bn. However, it warns the number across the whole of government could be much bigger, pointing to the Chancellor’s announcement in the Autumn Budget that he had set aside £1.5bn for Brexit preparations in 2018/19.

If all the money is allocated, the total amount spent over the years leading up to formal exit could be as high as £2bn.

To date, half the money spent on Brexit has gone on staff. Numbers have increased particularly quickly in the new departments, with DExEU growing from 50 to around 700 and DIT adding 800 new Brexit roles.

Between June 2016 and March 2018, Defra expects to have filled 1,200 new full time equivalent (FTE) EU exit roles. The Home Office is planning to have hired 1,500 new staff by September 2018, and HMRC is looking to take on between 3,000 and 5,000 by March 2019.

In 2018/19 alone, IfG estimates that the cost of new payroll staff working on Brexit in these six departments will be around £400m. In contrast, at the time of the EU referendum, the civil service was at its smallest since the Second World War, and 20% smaller than at the start of the coalition government in 2010.

The Home Office, for example, is using around 50% more agency staff per month now than it was in the year before the referendum. If this continues, the department will have spent almost £40m more on agency staff in 2017/18 than it did between June 2015 and June 2016, with a similar amount expected in 2018/19.

While DExEU received pro bono work from the likes of Accenture, Deloitte and KPMG in 2016/17, it is now starting to spend, signing a £1.9m contract with McKinsey for six months of work in 2017. BEIS and Defra have both recently signed £1m contracts with The Boston Consulting Group.

The Treasury has put aside a further £1.5bn for 2019/20.

The IfG said it was too soon to estimate the final bill for Brexit preparations, but suggests this figure ‘could prove to be a fairly comprehensive slush fund, or just the beginning’, depending on the final shape of the deal and whether new regulatory bodies, for example, are required.

Costing Brexit: what is Whitehall spending on exiting the EU? is here.

Report by Pat Sweet

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