Not banking on it
Last week, the Lords EU financial affairs sub-committee published its latest report, in part looking at how the UK should combat the loss of financial support from the European Investment Bank (EIB) post-Brexit.
Noting that the EIB has brought a considerable amount of cash to British projects over the years – and continues to do so – the committee called on the government to prepare for the loss of access to the organisation’s investment post-Brexit by establishing an infrastructure bank for the UK.
While this may make some sense, it seems that political appetite is low. There are a number of good reasons for this. First, there are far fewer projects around for investment at the moment, and a buoyant investment community that is desperate to put money into projects. With traditional investors and institutional investors all crowding the market, there will be some who believe the absence of the EIB will not be disastrous to UK projects.
Second, many politicians feel they have been burned before by the concept of a national bank. The Green Investment Bank was meant to catalyse a whole host of eco-friendly projects, getting the market off the ground and helping to transform the British economy in the process. That never quite worked out as those in charge had hoped, and the fact that it was a largely Liberal Democrat-led initiative during the coalition years meant it was always susceptible to being scrapped after 2015.
Add to the fact that many in Westminster were uncomfortable with the GIB being sold to private investor Macquarie, and you can see that there is not a great enthusiasm to repeat the process.
Furthermore, the government believes it already has a number of tools available to it to stimulate investment, particularly the UK Guarantees Scheme, which ministers have indicated is their preferred method for kickstarting investment into projects that might otherwise be deemed too risky by private investors.
Another string to the Treasury’s bow here has been its use of relatively small-scale start-up funds designed to catalyse further investment in certain sectors. The Treasury and Infrastructure & Projects Authority (IPA) seem to be sold on this notion, having established the Digital Infrastructure Investment Fund and then the Charging Infrastructure Investment Fund in recent years.
While those in the market may argue that these are woefully small funds compared to the scale of investment needed in broadband and electric vehicle infrastructure respectively, the government would respond that an infrastructure bank would not necessarily have any more capacity.
Where the notion of an infrastructure bank might make sense, as I have argued before, is in bringing together, under one roof, a whole range of funding tools – which could even go as far as to encompass ‘design, build, finance, maintain’ projects. That is something that Exchequer Secretary to the Treasury Robert Jenrick told the Lords committee that he might be willing to consider.
However, before anyone gets any ideas about a Canada Infrastructure Bank type of institution, with a long list of projects to be put through the model, it seems most in Westminster – and, for that matter, many in the private sector – would prefer to continue with the current, more piecemeal, approach.