Chancellor makes no promises on post-Brexit access to EIB funds
Potential threat to infrastructure projects from trains to university libraries
Philip Hammond is likely to increase the fears of UK infrastructure providers that they face being cut off from access to valuable European Investment Bank financing after Brexit, threatening projects spanning from trains to university libraries.
In his Mansion House speech, the chancellor will pledge that companies will retain access to the EIB while the UK is still an EU member, but he will not guarantee to fund a domestic replacement or set out an ambition to negotiate continued access to the EIB after 2019 under a special agreement with the EU27.
Facing an end to EIB finance will be a serious blow to many providers of British infrastructure, since the bank has outstanding loans in the UK worth more than £48bn and has helped finance trains, trams, energy projects, universities, housing and water projects.
The EIB is the EU’s development bank and also acts as a catalyst for private sector projects, providing project appraisal and attracting co-finance from private investors.
European treaties state that membership is reserved for EU member states and the European Commission has set out in its Brexit negotiating position publicly that Britain will lose access to most projects after Brexit and only receive the capital it put into the bank back once the existing loans to UK projects are repaid.
The Treasury was unable to confirm its ambitions for EIB access after 2019 in the Brexit negotiations when asked by the FT.
But Mr Hammond will seek to reassure infrastructure providers that there will be no immediate stop on funds from the EIB. Even though the bank’s management has said UK projects will continue to be financed until Britain leaves the union, the chancellor will pledge to provide additional assurances to the EIB to secure UK project finance “during our remaining period of EU membership”.
“Investors need certainty in order to continue to support the UK economy and create jobs as we leave the EU,” Mr Hammond will say. “That is why we will fortify the vital financial support that helps businesses to grow — from cutting edge start-ups right through to large-scale infrastructure projects.”
The chancellor will also provide some additional resources to the British Business Bank, a government-owned bank. Much smaller than the EIB, it seeks to help small companies raise finance but does not lend or invest directly in them, unlike the EIB.
The Treasury said the additional resources likely to be available to the BBB will go up by “up to £80m” helping to finance up to £320m of total investment “in the coming months”.
This is a far smaller amount than the average £7bn of finance provided annually by the EIB to Britain in recent years.
Treasury officials said that after Brexit, the government would decide whether it would seek to retain access to the EIB under a special treaty or whether it would consider a domestic alternative, but it was too early to say what the UK position was publicly. An official said the UK government did have a view, but it was private and the chancellor would not reveal it in his speech.
The Conservative party manifesto made no specific pledges about finding a replacement for EIB financing after Brexit.