London Daily

Focus on the big picture.
Sunday, Jul 13, 2025

Brexit: European interest rates rise may push up UK’s divorce bill by £5bn

Brexit: European interest rates rise may push up UK’s divorce bill by £5bn

New Treasury estimate comes as European Central Bank increases interest rates for first time in 11 years

Increasing interest rates in Europe could push up the UK’s Brexit divorce bill by £5bn, the government’s Treasury office has said.

The new estimate comes as the European Central Bank increased its interest rates for the first time in 11 years by 0.5 percentage points, ahead of the 0.25 percentage points expected by economists.

Simon Clarke, the chief secretary to the Treasury, made clear in a written statement that rising interest rates affecting EU pension obligations were the driving force behind the new divorce bill estimates.

The Brexit divorce bill includes the working out of long-term guarantees on certain lending and spending by EU institutions while the UK was still a member of the bloc.

Originally the government estimated the bill covering spending commitments would be between £35bn and £39bn. This included loans guaranteed by the European Investment Bank for infrastructure and other projects signed off during the UK’s membership.

No finite settlement was agreed as the bill takes account of performance of loans. The Treasury’s latest estimate put the figure at £42.5bn, up from £37.3bn a year ago.

In a written ministerial statement, Clarke said the rise was primarily down to the UK’s obligations for EU pensions.

“The primary drivers are the latest discount rates and inflation assumptions, which are centrally set by the government for valuing long-term liabilities,” he added. “However, given this is a multi-decade liability, the variables used in this forecast will continue to fluctuate up and down.”

Up until the end of last year, the UK says it has paid £5.8bn to the EU as part of the agreement.

A Treasury spokesperson added: “The unprecedented recent rise in inflation and changes in discount rates have increased our pensions liability, which is the biggest reason for the increased estimate.

“The true cost of the settlement is confirmed when payments are made, based on the value at the time. The Treasury continues to monitor and verify these payments in line with the negotiated agreement.”

The European Commission had calculated the divorce bill higher than the UK had at £41bn, at the time of the three-party withdrawal agreement which also included pacts on Northern Ireland and EU citizens’ rights.

The shadow of the withdrawal agreement continues to be cast on EU-UK relations with prime ministerial hopeful Liz Truss threatening to tear up the Brexit trade arrangements for Northern Ireland.

In turn the EU has delayed ratification of the UK’s associate membership of the flagship £80bn Horizon Europe science research programme, causing the loss of funding for some academic projects already greenlit by the European Research Council.

On Thursday 24 groups including the Royal Society, the Russell Group of universities and Cancer Research UK called on the two candidates battling to become the UK’s prime minister, Truss and Rishi Sunak, to commit to keeping the UK’s leading place in research, development and innovation (RDI).

In a letter to the candidates, they urged them to make membership of Horizon Europe a priority and to commit to spending 3% of GDP on RDI.

Newsletter

Related Articles

0:00
0:00
Close
Renault Shares Drop as CEO Luca de Meo Announces Departure Amid Reports of Move to Kering
Senior Aides for King Charles and Prince Harry Hold Secret Peace Summit
Anti‑Semitism ‘Normalised’ in Middle‑Class Britain, Says Commission Co‑Chair
King Charles Meets David Beckham at Chelsea Flower Show
If the Department is Really About Justice: Ghislaine Maxwell Should Be Freed Now
NYC Candidate Zohran Mamdani’s ‘Antifada’ Remarks Spark National Debate on Political Language and Economic Policy
President Trump Visits Flood-Ravaged Texas, Praises Community Strength and First Responders
From Mystery to Meltdown, Crisis Within the Trump Administration: Epstein Files Ignite A Deepening Rift at the Highest Levels of Government Reveals Chaos, Leaks, and Growing MAGA Backlash
Trump Slams Putin Over War Death Toll, Teases Major Russia Announcement
Reparations argument crushed
Rainmaker CEO Says Cloud Seeding Paused Before Deadly Texas Floods
A 92-year-old woman, who felt she doesn't belong in a nursing home, escaped the death-camp by climbing a gate nearly 8 ft tall
French Journalist Acquitted in Controversial Case Involving Brigitte Macron
Elon Musk’s xAI Targets $200 Billion Valuation in New Fundraising Round
Kraft Heinz Considers Splitting Off Grocery Division Amid Strategic Review
Trump Proposes Supplying Arms to Ukraine Through NATO Allies
EU Proposes New Tax on Large Companies to Boost Budget
Trump Imposes 35% Tariffs on Canadian Imports Amid Trade Tensions
Junior Doctors in the UK Prepare for Five-Day Strike Over Pay Disputes
US Opens First Rare Earth Mine in Over 70 Years in Wyoming
Kurdistan Workers Party Takes Symbolic Step Towards Peace in Northern Iraq
Bitcoin Reaches New Milestone of $116,000
Biden’s Doctor Pleads the Fifth to Avoid Self-Incrimination on President’s Medical Fitness
Grok Chatbot Faces International Backlash for Antisemitic Content
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
US Imposes New Tariffs on Brazilian Exports Amid Political Tensions
Azerbaijan and Armenia are on the brink of a historic peace deal.
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Weinstein Victim’s Lawyer Says MeToo Movement Still Strong
U.S. Enacts Sweeping Tax and Spending Legislation Amid Trade Policy Shifts
Football Mourns as Diogo Jota and Brother André Silva Laid to Rest in Portugal
Labour Expected to Withdraw Support for Special Needs Funding Model
Leaked Audio Reveals Tory Aide Defending DEI Record
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
×