UK Accused of Suspending Key EU Source of Broadband Investment

The UK Government has been accused of quietly suspending payments from the £3bn European Regional Development Fund (ERDF) due to the Brexit vote, which is despite both the EU and UK initially saying that it would be “business as usual” until we leave.

A number of projects across the United Kingdom are currently making use of or planning to use public funding from the ERDF, which must be matched by other private and public sources of investment, to improve broadband connectivity in rural areas.

One prime example of this is Cornwall, which has a long history of using EU investment to boost local connectivity and recently proposed to secure another £8-9m to further extend related coverage (here). But there are many others, although most are bidding for smaller amounts.

In theory the Brexit vote to leave the EU should not have impacted this source of investment, not least because the UK will continue to pay hundreds of millions into the EU for at least another couple of years before we officially leave. Similarly the EU had pledged that it would be “business as usual“, precisely to prevent disruption and conflicts like this over funding.

A Spokesperson for HM Treasury said in early July 2016:

“The UK remains a member of the EU and that means there is no immediate change to EU programmes. The government has ensured that EU funding is directed towards the UK’s economic priorities.”

However a new report in The Independent alleges that the UK Government has suddenly suspended payments from the ERDF, which could significantly disrupt many current and proposed projects that had been banking on it as a crucial source of investment.

The issue came to light after a group of London-based companies wrote to the Government in the hope of having the “pause” on their EU payments lifted. The letter itself referenced a March 2016 agreement for £3.7m of funding from the ERDF, which would be used to provide expert support to more than 600 tech start-ups in the City under a scheme called CASTS.

Extract from the Letter

“Until last week we were on track to sign the full funding agreement in mid-July. So it was with alarm that we heard … that, because of the referendum result, the Department of Communities and Local Government has notified the GLA [Greater London Authority] to inform Capital Enterprise that ERDF projects like CASTS, were to be put on ‘pause’ for an indefinite period.

We would urge you to unblock this funding which is vital to the tech community in London. [The referendum] result has created a lot of uncertainty and raised questions for what it means for tech businesses in London.”

Apparently both the Department for Communities and Local Government (DCLG) and the Mayor of London’s office have also written to the Treasury asking for the suspension of payments to be lifted. But at present the Government has yet to give an official explanation for the pause and thus it’s not known if the suspension affects only certain projects or all ERDF linked deals. We have also queried via the Broadband Delivery UK office and had no response.

Such a suspension might explain why the Manchester City Council recently warned that around £300m worth of EU funding up to 2020 “would no longer be forthcoming.” Last week David Gauke, the Chief Secretary to the Treasury, also advised parliament that he was unable to guarantee the future of EU sourced investment. A full statement from the Treasury is expected “in the not-too-distant future.”

Admittedly the number and scale of active or planned ERDF funded broadband projects in the UK has diminished significantly over the past couple of years, although there are still a few seeking funding from that pot and until now it had been expected that these would not be affected until after the UK leaves (predicted for around 2019/20).

The UK Government is likely to be concerned about any projects that run up to or past the expected leaving date (negotiations and a time-scale won’t even be set until the process formally begins), which could result in the Treasury having to top up any shortfalls from its own pot. In other words the suspension may not affect all ERDF deals, but it could still have a sizeable impact.