This paper estimates the net present value (NPV) of the direct fiscal savings accruing to the UK from not paying net contributions to the EU budget following its departure from the European Union. Drawing exclusively on primary official sources we construct annual cash-flow series over the period 2021–2064, the terminal year of the UK’s remaining financial settlement obligations, under a range of assumptions. The central estimate, discounted to January 2026, is £525 billion. These figures represent solely the direct budgetary dimension of Brexit and are explicitly not a cost-benefit analysis of Brexit as a whole.

1. Introduction and Motivation

The UK’s annual net contribution to the EU budget was a central and contested figure in the debate preceding the 2016 referendum. Claims ranged from the Vote Leave campaign’s widely cited £350 million per week gross figure to the Treasury’s published net-of-rebate-and-receipts estimate of approximately £8.5 billion per year (2015 basis). Neither side of that debate — and no official body since — has published a present-value calculation of the cumulative budgetary saving arising from non-membership. This gap is analytically significant. A policy decision of the magnitude of Brexit warrants the same rigour applied to any long-horizon public investment appraisal: future cash flows should be discounted to a common valuation date using a rate that reflects the opportunity cost of public funds.

This paper performs that calculation. It does not claim to be a cost-benefit analysis of Brexit in the round. Such an analysis would require credible counterfactual estimates of GDP, trade, Foreign Direct Investment (FDI), immigration, regulatory costs, and productivity, all of which are contested. This paper confines itself to one cleanly definable, primary-source-verifiable dimension: the stream of net contributions the UK would have paid to the EU budget, discounted to present value, net of the actual Brexit financial settlement payments the UK is obliged to make under the Withdrawal Agreement.

The analysis is timely. The most recent HM Treasury European Union Finances Statement (EUFS 2025), published March 2026, provides the full outturn and forecast schedule of remaining settlement payments through to 2065. The European Commission published its MFF 2028–2034 proposal in July 2025, providing a reliable long-term trajectory for the EU budget against which a counterfactual UK contribution can be estimated. These two data sources together underpin a significantly more precise model than was possible before the EUFS 2025 publication.

In addition, as proposals to ‘rejoin’ gain prominence, a parallel analysis could estimate the NPV of future budget contributions under a re‑accession scenario.

2. Methodology

2.1 Conceptual Framework

The NPV of the fiscal saving is defined as the discounted present value of the annual cash-flow differential between (i) what the UK would have paid as a continuing EU member state and (ii) what it actually pays (or is committed to pay) under the Withdrawal Agreement. Formally:

    NPV = Σ(t=2021 to 2064) [ (C_t − S_t) / (1 + r)^(t − 2026 + 0.5) ]

where C_t is the counterfactual net contribution in year t (the hypothetical payment the UK would have made as a member), S_t is the actual financial settlement payment in year t, r is the chosen discount rate, and the mid-year convention (t − 2026 + 0.5) is applied consistently. All flows are discounted to 1 January 2026 as the valuation date.

2.2 Counterfactual Contribution (C_t)

The UK’s counterfactual contribution is modelled as a percentage share of EU payment appropriations in each year. This approach is superior to extrapolating from a historical UK net contribution figure because it correctly tracks the growth of the EU budget itself — the relevant counterfactual is what the UK would have paid into the actual EU-27+ budget, not a projection from a 2015 base that predates post-Brexit EU budget expansion.

The UK’s average net contribution as a share of EU payment appropriations over 2014–2020 was approximately 10%, after accounting for the UK rebate (UK in a Changing Europe, 2020; EUFS 2024). In 2018, the UK contributed around 12% of the EU budget gross of rebate, and net of rebate and receipts approximately 10% (HMT EU Finances Statement 2024). We therefore use three scenarios:

• Low (8%): Conservative: assumes UK’s rebate would have grown over time or its relative GNI share declined; reflects the lower end of plausible counterfactual contributions.
• Base (10%): Central case: reflects the UK’s actual average net contribution share over 2014–2020 as reported by HM Treasury. This is the primary analytical assumption.
• High (12%): Upper bound: assumes the UK would have lost or significantly eroded its rebate (a plausible scenario given EU budget reform discussions) or that its relative GNI share increased.

2.3 EU Budget Trajectory

EU payment appropriations for 2021–2025 are taken from actuals/MFF schedules: €166.1bn (2021), €169.7bn (2022), €172.4bn (2023), €175.4bn (2024), and €180.6bn (2025) (EU Commission, MFF 2021–2027). From 2026 onwards, the budget is grown at 2% per annum in nominal terms, consistent with the Commission’s proposed MFF 2028–2034 total of approximately €2 trillion over seven years (approximately €285 billion/year at 2025 prices, implying ~2% nominal growth from 2025 levels). The €/£ exchange rate of £0.857/€ is applied throughout (EUFS 2025 spot rate as at 31 December 2025).

2.4 Settlement Payments (S_t)

Settlement payments for 2021–2025 are taken directly from EUFS 2025 Table 3.A (net figures in £): £1.8bn (2021), £6.4bn (2022), £6.3bn (2023), £1.0bn (2024), and £0.7bn (2025). Total net paid 2021–2025: £16.2bn. Remaining net liability as at 31 December 2025 is £5.3bn (EUFS 2025 Table 3.B), comprising: £0.2bn invoiced/outstanding January–May 2026 (September 2025 invoice); and £5.1bn in forecast payments June 2026 to 2065, predominantly EU civil service pension obligations under Article 142 of the Withdrawal Agreement, which decline gradually to approximately £0.01bn by 2065.

Note on the total settlement: HMT’s full settlement estimate of £30.9bn (EUFS 2025 Table 3.B) includes the Transition Period (February–December 2020) payments of £9.4bn. These are excluded from our NPV series, which starts from 1 January 2021 (the date of full non-membership). Including the Transition Period payments would add approximately £9.4bn (face value) to the settlement side, reducing NPV by approximately £10–11bn at 3.5%.

2.5 Discount Rates

Three discount rates are applied, in line with HM Treasury Green Book guidance and market practice:

3. Data Sources and Evidence Quality

4. Results

4.1 Historical Savings: 2021–2025

Between 2021 and 2025, the EU-27 budget grew from approximately £142bn to £155bn (sterling equivalent at EUFS 2025 spot rate). At the base 10% counterfactual share, the UK would have paid approximately £74.1bn in net contributions over this five-year period. Against this, actual net settlement payments totalled £16.2bn (EUFS 2025 Table 3.A), yielding a net fiscal saving of approximately £57.9bn in nominal terms — that is, the UK has already realised (or committed to realise) roughly £58bn in direct fiscal savings relative to the counterfactual of continued membership on 2014–2020 terms.

4.2 NPV Results: Central Case

At the central assumption (10% contribution share, 3.5% Green Book discount rate), the NPV of the total net fiscal saving discounted to January 2026 is £524.7 billion. This comprises the discounted value of the historical savings already realised plus the present value of future avoided contributions, net of remaining settlement payments of £5.3bn (nominal, primarily EU pension obligations declining to approximately zero by 2065). The settlement payments are small relative to the avoided contribution stream and have a negligible impact on the NPV: removing them entirely would increase the central estimate by less than 1%.

4.3 Sensitivity Analysis: Full NPV Matrix (£bn)

Table 4.1: NPV of Net Fiscal Savings — discounted to January 2026 (£bn)

Note: Base case (10% share, 3.5% rate) in bold/shaded. Undiscounted nominal total (base): £972bn.

4.4 Sensitivity to EU Budget Growth Rate

The 2% annual nominal growth assumption for the EU budget is the primary driver of the medium and long-term cash flows. Table 4.2 shows the NPV under 1%, 2%, and 3% annual growth scenarios at the base 10% share and 3.5% discount rate.

Table 4.2: NPV sensitivity to EU budget growth assumption (10% share, 3.5%)

The central estimate is relatively robust to the growth assumption: the range from 1% to 3% annual budget growth spans approximately £100bn at 3.5% discount rate, and the 2% base case sits close to the Commission’s own indicative trajectory for the MFF 2028–2034.

5. Key Assumptions — Robustness and Contestability

The paper distinguishes three categories of claim, in line with academic best practice for policy analysis under uncertainty:

ROBUSTLY SUPPORTED BY EVIDENCE

• The UK’s net settlement payment obligations run to 2065 and total approximately £30.9bn (HMT Treasury point estimate, EUFS 2025, NAO-audited). The remaining liability as at end-2025 is £5.3bn net.
• The EU-27 budget 2021–2025 payment appropriations are known with high precision from official EU Commission records.
• The UK’s average net contribution share was approximately 10% of EU budget payment appropriations over 2014–2020 (HMT EU Finances Statements).
• The HM Treasury Green Book mandates 3.5% as the standard real discount rate for long-term public sector appraisals.

CONTESTED AMONG CREDIBLE ANALYSTS

• Whether the UK’s rebate would have survived in the MFF 2028–2034 or subsequent MFFs. The Commission proposed abolishing or radically reforming rebates as part of Own Resources reform; the UK’s rebate was already subject to pressure. If the rebate had been lost, the UK share would have moved towards the 12% scenario.
• The appropriate counterfactual contribution base: should one use the 2019 actual net contribution (£9.4bn) as a fixed starting point, or track the UK share of an evolving EU-27 budget? We prefer the latter as more analytically coherent, but both approaches are defensible.
• The correct discount rate: 3.5% reflects the Green Book standard but the UK’s actual long-term borrowing cost is closer to 4.5–5%. At 5%, the central NPV falls to £428bn.
• The 2% nominal EU budget growth assumption: the Commission’s MFF 2028–2034 proposal implies approximately this rate, but EU budget negotiations have historically been tortuous and could produce lower or higher outcomes.

ASSUMPTIONS THAT CANNOT BE VERIFIED AND SHOULD BE TREATED AS SPECULATIVE

• Whether the political economy of EU membership would have led to a renegotiation of terms — as several UK governments sought — potentially altering the net contribution.
• Whether post-2035 EU budgets would continue to grow at 2% or accelerate (e.g., due to defence commitments, climate investment, or enlargement).
• The exchange rate trajectory: all future settlement payments are Euro-denominated; sterling appreciation would reduce the sterling cost, depreciation would increase it. The model holds the rate constant.

6. Comparison with Prior Estimates

So far as we are aware, no prior published work by an official body, think tank, or academic author has applied a present-value discount framework to the stream of avoided EU budget contributions. The closest approximations are:

• OBR (2020, Box C): ‘Spending the Direct Fiscal Savings from Brexit’: Quantified annual cash savings in nominal terms; noted the savings would be ‘fully recycled into substitute UK spending’. Did not present a discounted total. The OBR’s DEL-in-waiting analysis treated the savings as spent rather than as a net public finance benefit.
• HM Treasury EUFS (annual series, 2021–2026): Reports actual and forecast settlement payments; provides the raw material for this analysis. Does not attempt an NPV of avoided contributions. The HMT explicitly uses discounting for its settlement liability estimate (pensions component) but not for the savings side — an asymmetry noted by this paper.
• IFS (2016–2024): Brexit fiscal analysis: Consistently acknowledges the annual saving (~£8–11bn net) but frames it as smaller than the macroeconomic costs. Does not compound or discount the saving stream.
• Institute for Government (2019–2025): Tracks settlement payments and acknowledges the trade-off with foregone EU programmes. No NPV analysis.

7. Conclusions

This paper presents the first systematic present-value analysis of the UK’s direct fiscal savings from not paying EU budget contributions. Using primary official data from the EUFS 2025, EU Commission MFF schedules, and the HM Treasury Green Book discount rate, the central estimate is £525 billion NPV (discounted to January 2026 at 3.5%), with a plausible range of £269bn–£634bn across the nine scenario combinations tested.

Two principal findings merit emphasis:

1. The fiscal saving is large in isolation. It represents real public finance resources that the UK has not had to and will not have to transfer to Brussels.
2. The settlement payments are small relative to the avoided contribution stream. The remaining liability of £5.3bn (nominal) is approximately 1% of the central NPV estimate. Arguments that the ‘divorce bill’ negates the fiscal saving are numerically weak: even including the full £30.9bn HMT settlement total (including Transition Period payments), this represents approximately 6% of the central NPV.

Future work may seek to integrate this fiscal saving into a comprehensive NPV framework for Brexit as a whole, including the NPV of trade friction costs, other Brexit opportunities and changes in public spending on replacement UK programmes. The present paper provides one well-defined building block for such an analysis.

Appendix A: Annual Cash-Flow Model — Selected Years (Base Case, 10% Share)

All figures in £bn. Full model available in accompanying Excel file.

References

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