Government plans infrastructure bank to fund large-scale regeneration

Business secretary Alok Sharma has already mooted national development bank that would lend to small and medium-sized businesses

 Portrait engineer man wearing safety helmet standing back and looking to the construction site with modern city background, infrastructure bank concept

Under construction: Treasury is planning an infrastructure bank to oversee public investment

The Government is planning a new multibillion-pound infrastructure bank to replace the EU European Investment Bank, which may oversee small business lending as well.

The UK needs an infrastructure bank to fund roads and buildings and, increasingly, broadband installation now that Britain has left the EU.

According to the Financial Times, discussions are taking place across Whitehall as to how a new state-owned lender could help upgrade Britain’s creaking infrastructure.

Chancellor Rishi Sunak is expected to announce the creation of the infrastructure bank in his autumn statement. In his statement, Mr Sunak will unveil the “National Infrastructure Strategy” detailing how he will invest £100bn in long-term projects.

Until now, the EIB has lent about €8bn (£7.3bn) a year for projects ranging from Crossrail to social housing to new school buildings. Since 1973 the EIB has lent over €118bn to the UK.

>See also: Government confirms extra £200m backing for British Business Bank

Alok Sharma, the business secretary, has privately suggested a “national development bank” which could oversee areas including funding for small and medium-sized businesses, export finance and procurement.

However, one unnamed source told the FT that, as yet, there is no unified view of what the investment bank should be, with opinions split between the business department, the Treasury and 10 Downing Street.

One idea is that commercial investors such as private equity or venture capital could invest alongside Government, which would give investors comfort knowing they are investing in parallel alongside the state. Historically, private investors have shied away from funding state infrastructure projects such as Crossrail because as they often go over budget and are delayed.

In May the Government’s National Infrastructure Commission wrote to Mr Sunak calling for a £20bn new infrastructure bank.

Germany, Japan and Canada already have publicly owned, operationally independent financing institutions for infrastructure.

Further reading

Is EU funding for British SMEs drying up?

 

 

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