Fearing Britain may stop paying into the EU budget if there’s a no-deal Brexit, the European Commission is holding back some cash from spending departments.

Under its Brexit deal with Brussels, the British government agreed to keep paying into EU coffers until the end of the bloc’s current budget cycle in 2020. But the possibility that Britain may leave without a deal prompted Commission officials to take precautions, even before the House of Commons rejected the agreement on Tuesday — a move that Michel Barnier, the EU’s chief Brexit negotiator, said increased the risk of a no-deal departure.

“In light of the current state of affairs, and as a precautionary measure, the agreed 2019 budget is being made available progressively to spending departments — the bulk of it upfront and a small proportion to be released in the course of the year,” a Commission spokesperson said.

It is unclear if Britain would stop paying into the budget even if it left the EU without a deal. But in order to limit the impact of such a sudden shock to the bloc’s finances, the Commission has asked employees to be more cautious with new spending in the first months of the year and leave a cushion for later in 2019.

“It is the Commission’s duty to ensure the sound financial management of the EU budget,” the spokesperson said. “Beneficiaries whose projects have already been signed will not be affected — all legal and contractual obligations will be honored. This precautionary measure only concerns new projects,” the spokesperson added.

The Commission declined to disclose the percentage of funding that is being held back.

The U.K. is currently one of the biggest net contributors to the EU’s budget, which finances everything from agricultural subsidies to regional programs and research projects. The EU is not allowed to go into debt, relying on contributions from member states and revenue from customs duties to finance much of its operations.

Some European institutions are growing increasingly worried about the prospect of post-Brexit budget cuts, as it is unclear whether member governments would automatically step in to plug the gap if London stopped making payments.

“With so much uncertainty clouding the U.K.’s departure from the EU, we need to prepare for the worst to cushion the blow Brexit could have on its regions and cities,” said Karl-Heinz Lambertz, president of the European Committee of the Regions.

Experts say, however, that even in case of a no-deal Brexit, the British government could still decide to honor its financial obligations to the bloc for the 2014-2020 budget cycle. To do otherwise would risk a huge loss of goodwill among EU countries as the U.K. seeks to negotiate its future relationship with the bloc.

“At the end of the day, it’s political,” said Guntram Wolff, director of the Brussels-based Bruegel think tank, who expects that, in a no-deal scenario with Theresa May still in power, the U.K. government would continue making payments into the current EU budget.

“If more radical forces and more angry forces get to power, at that stage I could see a sort of collaboration breakdown [with the EU], and that means basically also no money,” he said.

Tags: ; ; ;