‘Fewer, smaller, and lower-risk projects’ were funded by the European Investment Bank’s replacements, according to Thinktank.
According to a recent analysis, the government’s new government-owned lenders are making investments two-thirds less what the UK was getting from the EU’s European Investment Bank.
The EIB has supported a variety of UK projects for more than 40 years, including the Channel Tunnel, the Manchester Metrolink, offshore wind farms, and modernizing the National Grid.
The performance of new institutions funded by the Treasury, such as the UK Infrastructural Bank (UKIB), has been compared to that of the EIB by the thinktank the United Kingdom in a Changing Europe.
Between 2009 and 2016, the European Investment Bank (EIB) spent an average of £6.4 billion in the UK, reaching a peak of £7.5 billion in 2016—the year of the vote to leave the EU.
The UK The infrastructure Bank (UKIB), a Leeds-based successor institution, invested £2.4 billion in 2022, which is only a third of what the EIB was doing six years earlier.
By the end of the decade, it is unclear if the UK’s domestic development banks would be able to cover the gap left by the EIB. They are unable to scale up operations quickly due to a lack of personnel and knowledge, according to Stephen Hunsaker, who co-authored the paper with Peter Jurkovic.
“They also haven’t attained the EIB’s coveted AAA credit rating. As a result, they charge higher interest rates when lending money for public good projects.
The Scottish National Investments bank, the Development Bank of Wales, and the British Business Bank are among the new entities, which likewise seem to be less invested in building infrastructure than the EIB.
In 2022, they together funded just 17% more in infrastructure projects than the EIB had before it started to cut ties with the UK.
Labour’s shadows City a minister, Tulip Siddiq, stated: “The Tories’ refusal to make investments in British industry resulted in development on bottom and our services to the public falling apart with those who work paying the price.
Through our national wealth fund, Labour will “unlock billion of pounds of investment from the private sector to deliver modern gigafactories, clean steel plants, and renewable-ready ports throughout Britain.”
The Treasury spokesman for the Liberal Democrats, Sarah Olney, said: “This terrible report reveals yet another failed commitment from this Conservative administration. We already knew that the government’s failed trade agreements had harmed farmers and [fishers], but suddenly their investment plans had also been destroyed.
Former HSBC CEO John Flint, the head of UKIB, has indicated that the organization plans to increase investment in the years to come, particularly in initiatives related to the government’s goal of being net zero.
“The financing needs that directly result from the government’s net zero goal will only continue to start expanding significantly year after year,” he stated earlier this month.
However, the “The Investment Gap” report from the UK in a Developing Europe contends that severe lending restrictions put in place by the Treasury to safeguard taxpayer money will limit the UKIB’s expansion.
In order to support initiatives that private investors perceive too risky, public sector lenders like the EIB seek to take advantage of the lower borrowing rates and longer time frames of governments.