The UK’s ability to fund its future infrastructure requirements will be at risk if a replacement for the finance streams currently delivered by the European Investment Bank is not established post-Brexit, peer have warned.
Members of the House of Lords’ EU Financial Affairs Sub-Committee said the UK had received funding worth more than €118bn from the EIB since it joined the European Union in 1973, almost half of it over the past decade.
The committee, said a host of the nation’s biggest infrastructure projects had benefitted from EIB lending – but loans had plunged since the UK’s June 2016 decision to leave the European Union. It urged the government to consult on options for creating domestic alternatives for the bank.
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According to the committee’s report, the EIB provided £5.6bn in funding for 40 different UK infrastructure projects in 2015 alone. But it noted that after the following year’s referendum decision there had been a “marked decline” in lending to the UK.
Lords said that the EIB not only provided cheaper and longer-term loans than commercial lenders, but also provided projects with a “stamp of approval” that crowded in additional investment.
They added that while the government had taken steps to help small and medium-sized businesses cope with impacts on their borrowing capacity likely to result from Brexit, “riskier infrastructure projects” would find it more difficult to access alternative funding at a similar cost.
Committee chair Baroness Falkner of Margravine said the EIB had supported “all manner of vital infrastructure projects” over the past 45 years, including Crossrail, London’s super sewer, the expansion of Manchester’s tram network and Scotland's Beatrice offshore wind farm.
“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,” she said.
“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, which for the UK could amount to €7.6bn."
The committee said the consultation on establishing a UK infrastructure bank should be part of the government's infrastructure finance review. Members said the new bank should form part of the National Infrastructure Strategy, depending on the outcome of the consultation.