Funding is a vital aspect of running a UK Economic Interest Grouping (UKEIG). Although UKEIGs are not designed to make profits for themselves, they still require sufficient resources to cover their operational costs and deliver the services or support that benefit their members. How a UKEIG is funded, how funds are managed, and how financial obligations are shared between members are all essential considerations in setting up and maintaining such a grouping.
Unlike limited companies, UKEIGs are fiscally transparent, and their financial structure is more collaborative in nature. Each member is expected to contribute in proportion to the level of involvement or as agreed in the formation contract.
Not-for-Profit by Design
A UKEIG cannot aim to make profits for itself. Its primary purpose is to support and enhance the economic activities of its members. Any benefit derived from its work is passed on directly to the members, not retained by the grouping.
This does not mean, however, that a UKEIG cannot receive income. It can charge for services provided to members, apply for funding, and recover costs. What matters is that surplus income is not distributed as profit, but used to further the objectives of the grouping or offset future costs.
Member Contributions
The most common and straightforward form of funding for a UKEIG is contributions from its members. These contributions may be:
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Fixed annual payments
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Variable contributions based on usage or benefit
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In-kind contributions, such as staff time, equipment, or access to facilities
The details of these contributions are normally set out in the formation contract. Members are expected to meet their agreed financial commitments on time. Failure to do so can place the grouping at risk and may trigger penalties or even the withdrawal of membership rights.
As the members are jointly and severally liable for the UKEIG’s obligations, the financial stability and cooperation of all parties are essential.
External Funding Sources
Although member contributions form the backbone of UKEIG funding, groupings may also pursue other sources, provided they align with the grouping’s purpose and legal framework.
1. Grants
UKEIGs are eligible to apply for grants, particularly for research, innovation, community development, or sector-based collaboration. Possible sources include:
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UK Research and Innovation (UKRI)
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Innovate UK
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Local enterprise partnerships
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Charitable foundations or trusts
Some international funding sources may still be accessible depending on the nature of the project and the partnership makeup.
2. Public Sector Contracts
A UKEIG may be well positioned to tender for certain public sector contracts where collaboration is a key requirement—such as regional development projects or joint service delivery.
In such cases, the UKEIG operates as the legal vehicle through which multiple entities can coordinate their contribution to the work, share costs, and pool expertise.
3. Service Charges
In some cases, the grouping may recover costs by charging its members (or, in rare cases, third parties) for services it provides. These must still align with its core purpose and cannot be profit-driven in intent. Common examples include:
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Shared training or consultancy services
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Coordinated transport or logistics
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Access to shared facilities or software
Financial Management
As a legal entity, a UKEIG is responsible for proper financial administration. While it does not file statutory accounts with Companies House, it must still maintain internal records and produce financial information for its members.
Key aspects of financial management include:
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Budget planning
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Record keeping and audits
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Cash flow monitoring
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Transparent reporting to members
Members should be given access to financial information to ensure transparency, especially given their joint liability.
The grouping may appoint a treasurer or finance officer (who may be a manager or member) to oversee these responsibilities.
Tax Considerations
UKEIGs are fiscally transparent, which means that the grouping itself is not taxed. Instead, the profits or losses of the UKEIG are passed through to its members, who must report them on their own tax returns.
Each member is responsible for:
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Declaring income or losses attributable to them
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Paying tax based on their own status (individual, company, etc.)
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Handling any VAT implications if applicable
The UKEIG must still register for VAT if its activities exceed the UK VAT threshold, even though it is not a profit-making body. This is often the case when the grouping provides taxable services or purchases goods and services collectively.
Risk and Liability
As UKEIG members are jointly and severally liable, managing financial risk is particularly important. Members are collectively responsible for the grouping’s debts, which means that if one member cannot pay, others must cover the shortfall.
To mitigate this:
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Adequate insurance should be considered
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Contributions should be clearly defined and enforced
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Financial controls and oversight should be robust
Conclusion
Funding a UKEIG requires careful planning, transparency, and cooperation. While primarily funded by its members, a UKEIG may also benefit from grants, service charges, or public sector support, provided these are consistent with its not-for-profit nature.
Sound financial management not only ensures the grouping can meet its objectives—it also safeguards its members from unexpected liabilities. For any organisation considering forming or joining a UKEIG, understanding and agreeing on a sustainable funding model is essential from the outset.