Britain’s new Infrastructure Bank is on track to deliver barely a fifth of the financial support the European Investment Bank provided before Brexit, according to the government’s independent fiscal watchdog.
Ministers set up the bank in June 2021 in part to replace the EIB’s function in the UK after it left the EU and help deliver on two core policies: the 2050 net zero target and the “levelling up” agenda designed to address regional economic disparities.
It was also designed to fill the hole made when the Green Investment Bank (GIB) — set up by the Tory-Liberal Democrat coalition government in 2012 — was privatised in 2017.
An assessment by the Office for Budget Responsibility, published as part of this week’s Budget, found the Leeds-based lender was set to miss its target of providing £1.5bn in loans, equity financing and guarantees annually.
“Our current view is that cumulative UKIB outlays between 2022-23 and 2025-26 will be 37 per cent lower than the initial estimate (£3.7bn versus £5.9bn),” the OBR said. “This continues to reflect the initial over-optimism in the UKIB’s investment pipeline activities and the fact that new ventures have taken longer than expected to deliver.”
In contrast, the EIB provided about £5bn a year in financial support to projects in the UK in the five years before the Brexit vote of 2016.
The OBR added that it expected it would take three years for UKIB to reach its annual £1.5bn target.
Labour’s Rachel Reeves, the shadow chancellor, said: “That the government’s ambitions for the UK Infrastructure Bank have been drastically reduced shows how their failures on growth are starting to snowball.
“As with much in this Budget, they are papering over the cracks of their own mistakes over the last 13 years.”
Sir Ed Davey, leader of the Liberal Democrats, said the figures showed the Conservative government had made a mistake by selling off the GIB six years ago. “This damning verdict exposes the Conservatives’ appalling failure to deliver the crucial investment they promised across the UK,” he said.
UKIB said it was “not accurate” to make a direct comparison between itself and the EIB. It added that as its shareholder, the government had “always been clear that the bank will only replace some of the activities of the European Investment Bank following the UK’s departure from the EU”.
It added: “We provide more targeted support across specific sectors than the EIB and will be more aligned with the UK government’s objectives, with a great focus on additionality to avoid crowding out private sector investment.”
The House of Commons public accounts committee recently criticised UKIB, questioning whether it had a “strategic view of where it best needs to target its investments”. The PAC accused the lender of “reinventing the wheel” by funding projects already backed by private capital.
The UKIB, which is run by former HSBC boss John Flint, has so far deployed £1.1bn of its initial £22bn capital in 11 projects. It said those investments would unlock more than £4.8bn in private capital.
