UK infrastructure bank could be needed to plug the post-Brexit funding gap, says Lords EU Committee
Since joining the EU in 1973 the UK's infrastructure has been the beneficiary of more than €118 billion of lending from the European Investment Bank (EIB). The UK will lose access to the EIB after Brexit and the Government should consult on establishing a UK infrastructure bank.
This should be explored within the Government's infrastructure finance review and, depending on the outcome of this review, be part of its National Infrastructure Strategy.
This is the main conclusion of the House of Lords EU Financial Affairs Sub-Committee's report, 'Brexit: the European Investment Bank', published today.
There has already been a marked decline in funding from the EIB since the referendum and triggering of Article 50, which has fallen 87% since 2016. Despite this, and the fact that the EIB will completely stop supporting new UK projects after Brexit, the Government has said little about the future relationship.
Under the Withdrawal Agreement, the UK will receive the €3.5 billion of capital it has paid into the EIB. However, the UK will not receive any share of the profits that the EIB has accumulated, nor any interest or dividends. The report calls for the Government to give taxpayers a better account of why it has not claimed any share of this money, which could amount to €7.6 billion.
Commenting on the report, Baroness Falkner of Margravine, Chair of the EU Financial Affairs Sub-Committee, said:
“For the last 45 years the UK has relied on the European Investment Bank to invest in all manner of vital infrastructure projects such as Crossrail, London's ‘Super Sewer', the expansion of Manchester's tram network and Scotland's Beatrice offshore windfarm.
“The UK's infrastructure, and the industries that depend on infrastructure spending, will be hurt if the Government does not quickly find a way of plugging the funding gap that will be created if access to the EIB is lost after Brexit.
“We're calling on the Government to give serious and swift consideration to the creation of a UK infrastructure bank. It also needs to come clean about why it has not claimed any share of the EIB's profits.”
The EIB has been an important provider of funding for the UK, including almost €50 billion over the last decade. It has funded different sectors of the economy, notably in the areas of energy, transport, water and housing. In 2015 alone, the EIB provided £5.6 billion for 40 different projects in the UK, amounting to approximately one third of total funding of UK infrastructure.
More than one-quarter of the EIB's financing for the UK has gone to the energy sector. One example of this support is the Beatrice windfarm in Scotland, which will generate electricity for more than 475,000 homes.
The EIB has supported some of the UK's most significant transport projects in recent years. It has contributed to Crossrail, London Overground and the Underground and Docklands Light Railway extensions. It has also provided £600 million for major road transport routes in Scotland, helped introduce new trains on the East Coast Main Line, supported the expansion of Greater Manchester's Metrolink network, and provided £825 million of funding for ports and harbours across the UK.
The EIB has financed the UK's water and sewerage systems. In 2015 it provided a £530 million loan to support Severn Trent's investment programme for drinking water and waste water treatment. The EIB also backed the Thames Tideway Tunnel in 2016 with a £700 million loan.
In recent years the EIB has provided £1.5 billion to the Affordable Housing Finance programme in partnership with The Housing Finance Corporation, supporting the construction of 20,000 new affordable homes.