Thursday

20th Sep 2018

Relocation of EU agencies could save money

  • EU civil servants working in other countries than Belgium or Luxembourg receive their salary with an adjustment that takes into account the local cost of living. (Photo: Ken Teegardin)

The relocation of the European Medicines Agency (EMA) and the European Banking Authority (EBA) out of London after Brexit, may not be completely negative.

It is likely that the moves will lead to a financial windfall of several million euros a year, because of the way EU salaries were calculated.

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EU civil servants working in other countries than Belgium or Luxembourg receive their salary with an adjustment that takes into account the local cost of living.

This mechanism is called the correction coefficient.

The coefficient for the UK is the highest in the EU: 141.8 percent. That means EU staff working in London get 141.8 percent the salary their peers in the same salary basket get in Brussels.

After the UK leaves the European Union, the EMA and EBA will be relocated elsewhere in the Union.

Because the UK's correction coefficient is the highest, it is highly likely that this means EBA and EMA staff salary will go down, to reflect the cost of living in the new host cities.

EUobserver calculated that because of this, the agencies stand to save between €9 million and €84 million a year.

This back-of-the-envelope calculation does not take into account several other factors and needs to be regarded as a rough estimate of the true magnitude.

Calculation

EMA's salary cost in 2017 was €112,104,000, while EBA spent some €23,871,000 on staff.

The smallest decrease in salary costs for the agencies would be if the largest agency – EMA – would relocate to the country with the highest coefficient after the UK, while the EBA would go to the second-highest after the UK.

Denmark has a coefficient of 133.1 percent. Sweden has one of 127.4 percent.

If these two countries ended up being the future hosts of the agencies, with EMA going to Denmark and EBA going to Sweden, the agencies would still save some €9.3 million per year.

However, Sweden and Denmark both are bidding to host the EMA. The country with the highest coefficient that is bidding for the EBA is Germany, which would create savings around €13 million.

At the other extreme are Bulgaria and Romania, which have a correction coefficient of respectively 51.1 percent and 63.8 percent. In other words, EU salaries in Bulgaria are roughly one-third of what they are in the UK.

If the EMA would go to Bulgaria, and the EBA to Romania, the annual savings would be €84.8 million.

The combination EMA in France and EBA in Germany would save €28 million a year.

Caveats

A source in the EU commission told EUobserver that the above logic is sound, but that many more factors will come into play that will determine the agencies' staff costs after Brexit.

Some people with many years of experience may decide not to leave London, and will be replaced by less experienced staff, whose base salary will be lower.

Also, base salaries may rise, while the correction coefficient is adjusted twice a year.

It is also not unthinkable that EBA and EMA staff received their old UK salary during a transitional period.

'Too early' to comment

A spokesman for the European Commission said it was “too early” to comment.

EU member states have until 31 July to register their bid to host the agencies. A decision is scheduled for November.

The windfalls are mostly relevant to the operating budgets of the agencies themselves.

The EU's contribution to EMA is limited, with most of the revenues coming from the agency's own selling of services.

EBA gets about 37 percent of its revenue from the EU, with most of the rest coming from national supervisory authorities.

What is also unclear, is who will pay for the medicines agency's rental bill. The EMA signed a contract without a termination clause, and could be faced with a total of €347.6 million spread out until 2039.

EUobserved

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The Spanish health minister this week bragged that Barcelona was “the best city”, had “the best building”, and “the best infrastructure” to host the EU's medicines agency post-Brexit.

Interview

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Martin Kern has been interim director of the European Institute for Innovation and Technology for almost three years. “I understand it must look a bit unusual from the outside.”

EU agency relocation race starts with 23 cities

Cities from 21 countries have applied to host the two London-based EU agencies, which will have to be relocated after Brexit, with Luxembourg throwing its hat in for the banking authority.

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