The UK pledged to support British businesses and universities that receive billions of pounds a year from the European Union after the country leaves the 28-nation bloc.
Projects approved before the government’s autumn budget statement will receive full funding, while the Treasury will make arrangements to assess guarantees for projects signed later, according to a statement Saturday on the government’s website. The UK also will match the level of agricultural funding until 2020, Chancellor of the Exchequer Philip Hammond said in the statement.
“We recognize that many organizations across the UK which are in receipt of EU funding, or expect to start receiving funding, want reassurance about the flow of funding they will receive,” Hammond said. “We are determined to ensure that people have stability and certainty in the period leading up to our departure from the EU.”
The announcement comes as the UK faces a daunting array of demands from EU nations when exit negotiations begin, heralding a long and complex process that’s likely to generate uncertainty and weigh on business investment.
After Brexit, about 1 billion pounds ($1.3 billion) in research funding may drain out of programs seeking to develop new medicines, according to analysts at Shore Capital Group Ltd. Meanwhile, Britain’s farmers are set to lose about 3 billion pounds in subsidies a year from Europe.
From 2007 to 2013, the UK received 8.8 billion euros ($9.8 billion) from the EU to fund research, development and innovation activities, according to a December 2015 report by the Royal Society, citing figures from the Office for National Statistics.
The Treasury will “consult closely” with stakeholders to ensure any ongoing funding commitments best serve the UK’s national interest, David Gauke, chief secretary to the Treasury, wrote in an Aug. 12 letter to Brexit minister David Davis.
“Leaving the EU means we will want to take our own decisions about how to deliver the policy objectives previously targeted by EU funding,” Gauke wrote.
Pound traders, meanwhile, may have more reasons to fret next week amid economic reports that will show the true extent of the fallout from the UK’s decision to exit the European Union.
Sterling, already this year’s worst performing major currency, could come under further strain as reports on inflation, retail sales and unemployment benefit claims provide more detail on how the UK economy is faring after the referendum. The pound has been one of the most obvious causalities of Brexit, undergoing its worst-ever day when the result became clear, while losses deepened in the last week in the wake of the Bank of England’s decision to cut interest rates and boost its stimulus plan.
“The risks are to the downside in the data,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “It’s going to be a case of another week of a challenging backdrop for sterling.”
Sterling has dropped more than 13 percent since Britons opted to leave the EU, and fell below $1.30 this week for the first time since July, approaching the three-decade low of $1.2798 reached in the wake of the vote. It has already surpassed its post-Brexit low against the euro, sliding to its lowest since August 2013 on Friday.
