Infrastructure bank will offer a third of financing of its EU predecessor, says Treasury forecaster

THE UK’S new infrastructure bank will offer annual loans and investment worth two thirds less than its EU predecessor, the Treasury’s independent forecaster has said.

Announcing the institution, Rishi Sunak said: “Located in Leeds, the bank will invest across the UK in public and private projects to finance the green industrial revolution.”

The bank, the first of its type in Britain, will have an initial capitalisation of £12billion and is expected to support at least £40billion of total investment in infrastructure, Mr Sunak added. It will extend loans, equity financing and guarantees to fund projects that will help tackle climate change and support regional and local economic growth.

The Office for Budget Responsibility (OBR) highlighted that the Treasury had placed a cap on the bank’s capital over the next five years amounting to £12billion in actual liabilities, to finance loans and equity, and a further £1billion in contingent liabilities, in the form of guarantees. It noted the government forecast that the bank would lend and invest around £1.5billion a year and compared it with the European Investment Bank (EIB), which lent an average of £5billion a year to UK projects in the five years before the EU referendum in 2016. Lending plunged after the vote.

The financing provided by the infrastructure bank will be equivalent to around a third of that offered by the EIB before the referendum, the OBR said.

Britain joins a well-populated club of countries that have national investment banks. Germany boasts one of the largest and oldest. Kreditanstalt für Wiederaufbau had total assets of €506billion, or 14.7 per cent of Germany’s GDP, in 2019.