UK's Brexit divorce bill may soar by £5bn, Treasury warns

Increase is being blamed on rising interest rates and EU pension commitments

Britain's departing Prime Minister and Conservative Party leader Boris Johnson drives a Brexit-themed digger, in 2019. Getty
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The UK Treasury increased its estimates of the amount it owes the EU by £5 billion ($6.5bn) on Thursday, raising the UK’s Brexit divorce bill to £42.5bn.

Chief Secretary to the Treasury Simon Clarke blamed rising interest rates affecting EU pension obligations for the new figure.

The government originally estimated the bill covering spending commitments made during the 47 years of the UK’s membership of the bloc would be between £35bn and £39bn.

The Treasury’s latest estimate put the figure at £42.5bn – up from £37.3bn a year ago.

That is an increase of £5.2bn.

In a written ministerial statement, Mr Clarke said the rise is 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 £5.8 billion to the EU as part of the agreement.

“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," said a Treasury spokesman.

“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.”

Updated: July 21, 2022, 9:27 PM