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UK to Establish Infrastructure Bank to Fund Capital Projects Amid Economic Recovery

Strategic Insights

— 2 min read

Chancellor Rishi Sunak is reportedly drawing up plans for a state-owned infrastructure bank to provide billions of pounds in funding for capital projects, as the government seeks to boost Britain's economic recovery following the pandemic. With the country's departure from the European Investment Bank (EIB) looming, ministers are exploring options for a new lender to accelerate upgrades to the UK's infrastructure. The proposed bank is expected to play a crucial role in financing projects such as road and rail upgrades, social housing, and new school buildings.

Key Takeaways:

  • The UK government is planning to establish a state-owned infrastructure bank to provide funding for capital projects, with an initial estimated budget of billions of pounds.
  • The bank is expected to replace the role played by the EIB in the UK, which has lent approximately €8 billion per year for various projects.
  • The EIB has lent over €118 billion to the UK since 1973.
  • The government plans to borrow an additional £100 billion over the next five years for capital spending, with a focus on left-behind areas in the Midlands and the North.
  • Energy minister Kwasi Kwarteng has separately proposed the creation of a new Green Investment Bank.
  • The Treasury's main focus is on a larger lender that would incorporate all types of infrastructure lending, incorporating public sector low borrowing rates and private sector discipline.

Statistics:

  • The EIB has lent approximately €8 billion per year for various projects in the UK.
  • The EIB has lent over €118 billion to the UK since 1973.
  • The government plans to borrow an additional £100 billion over the next five years for capital spending.
  • The UK government is planning to establish a state-owned infrastructure bank to provide funding for capital projects, with an initial estimated budget of billions of pounds.

Sources:

  • One person close to the discussions : "The idea is something that would be able to replace the EIB when that disappears as a means of providing funding, but with lots of Treasury buzzwords about innovation and addressing market failure."
  • One government official : "The talks have stepped up and I think the government is very serious about doing this now."
  • CNBC: "The UK government has vowed to borrow an extra £100bn over the five-year parliament for capital spending, targeting mainly left-behind areas in the Midlands and the North."
  • The Prime Minister's Office: "The Chancellor of the Exchequer will make an announcement on the bank in his Autumn Statement."
  • The UK Government's National Infrastructure Strategy: "Over £100bn of spending for his investment plans."
  • The European Investment Bank: "Lent €118bn to the UK since 1973."

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