Research Paper published by the House of Commons
Library
Many Territory Governments have raised concerns that the UK’s
decision to leave the EU has impacted negatively on their
access to markets, EU development funding, and funding for
environmental protection. The UK Government has pledged to work with the
Territories to manage the transition and establish new
funding and trading opportunities.
What are the UK Overseas Territories (OTs)?
Around 260,000 British nationals live in the ten permanently
inhabited OTs. Each inhabited Territory has its own elected
government and/or legislature, and UK-appointed Governors retain
responsibility for their external affairs. The OTs have no
separate international representation or right to negotiate, or
agree to, international agreements without the UK’s permission.
Aside from Gibraltar, the Territories were never part of the EU.
Instead, like other European territories overseas they
were part of an overseas territory
association. This gave them access to certain funding and the
single market.
UK-EU agreement and the Territories
Despite the request of the UK Government, the EU declined to
allow the Territories to be covered by the UK-EU Trade and Cooperation
Agreement (TCA). Because some OT exports to the EU now
face tariffs, Territory governments have raised concerns for their
economies and public finances (PDF). They have
also cited potential
benefits (PDF) including access to Asian markets under
new trade agreements and access to UK funding.
Access to EU funding and UK replacements
OTs access to funding varies, being mainly dependent on their
level of income. Many received funding through two EU schemes:
-
The European Development Fund
(EDF). Eligible Territories are expected
to receive funds until 2024.
Six Territories, including Pitcairn and Montserrat, will
receive around £69 million in
total (PDF). The EDF has supported infrastructure development,
tourism, and education.
- The Biodiversity and Ecosystem Services
inTerritories (BEST) provided
around £1 million each year to support the UK OT
environments.
Discussions on replacements are on-going. The UK Government has
committed to consider long-term funding and to account for shortfalls when
planning. The UK provides its own funding streams to the
Territories:
Trade agreements and UK-OT-EU trade
OTs are not automatically covered by the UK free trade
agreements, but they can agree to their inclusion in a trade deal
should they choose. Some OT goods face tariffs when imported into
the EU because they are not covered by the TCA. However, the OTs’
access to the UK market is tariff- and quota-free.
UK-OT trade is heavily concentrated on a small number of
Territories. In 2019, the Cayman Islands, Bermuda and Gibraltar
accounted for 91% of UK exports to and 98% of
UK imports from the OTs. Data on the Territories’ EU trade is
only available for trade in goods. In 2021, they exported US$0.5
billion and imported US$2.0 billion, resulting in a
trade deficit.
As the OTs are not covered by the TCA tariffs are in place for key OT
exports, such as fish. This is particularly significant to
the Falklands, where fisheries constitute around 35-48% of
its Gross Domestic Product (PDF).
The UK has provided technical support for the
Falklands to navigate the tariffs (PDF).
Sovereignty of the Falklands and Gibraltar
Argentina disputes UK sovereignty over the
Falklands. The Territory’s Government considered the UK’s EU
membership to offer “considerable certainty
and support” to it. The Argentinian Government
has said that it now “expects more
support” from the EU following Brexit. The UK
continues to reject the
claims and stresses the Falkland’s right to
self-determination.
Spanish Governments have sought to reclaim Gibraltar by
peaceful means. They have also proposed shared or joint
sovereignty with the UK. Successive UK Governments have
rejected making any changes against the wishes of the
Gibraltarians. Gibraltar was not covered by the TCA, and instead
a separate agreement is to be negotiated. As of July
2022, discussions are ongoing.
Documents to download
Brexit and the UK's Overseas Territories
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