Challenges ahead to spend remaining EU money by end of 2023
All EU Structural Funds Programme and Rural Development Programme funding has been committed to projects, but with £504 million still available to be spent
Significant risks are being managed by WEFO and the Welsh Government to maximise the drawdown of funding, but some are no longer in their control.
Wales is a long-term recipient of European funds, with the largest programmes being the Structural Funds Programme and the Rural Development Programme, managed by the Welsh European Funding Office (WEFO) and the Welsh Government’s directorate for rural affairs respectively.
Our report has found that the WEFO and Welsh Government have managed to commit all EU funding to projects and more. However, there is still a considerable amount of money available to be spent by the end of 2023. At the end of March 2023 this figure was £504 million, including £446 million for the Structural Funds Programme and £58 million for the Rural Development Programme.
WEFO and the Welsh Government have faced some significant challenges in progressing the funding programmes, including impacts from the COVID-19 pandemic and recent high inflation. Supply chain issues and labour shortages have also affected project delivery. Despite these issues, all EU funding and more has been committed to projects and beneficiaries.
However, WEFO and the Welsh Government are managing some significant risks to maximise the drawdown of EU funding, but some of these risks are no longer in their control. Key risks include fluctuations in the exchange rate and a reliance on projects and beneficiaries to deliver as expected. Ensuring continued rigour in the checking of claims and good record keeping, supported by appropriate staffing, is also important to manage the risk that funding is subsequently reclaimed by the EU.
Across the two programmes combined, every 1% of EU grant not spent equates to just under £27 million. However, managing the programmes is a balancing act. Although common practice, with commitments to projects and beneficiaries exceeding the available EU grant, if all the committed funding is claimed then expenditure over the 100% EU grant will need to be funded by the Welsh Government.
I do not underestimate the challenge of trying to maximise the spend of the remaining EU funds. Landing the programmes short involves a loss of money to Wales but landing in the other direction would mean a potentially substantial bill for the Welsh Government. Despite difficult circumstances, it is encouraging to see that WEFO and Welsh Government have committed all EU funding and that there is a positive trajectory for programme spending. That progress needs to be sustained while also managing significant risks and ensuring value for money.