Major infrastructure projects could be “hurt” if the government fails to plug the funding gap left by Brexit, a House of Lords report has warned.
The government is coming under more pressure to replace funding the country will lose from the European Investment Bank (EIB) after Brexit on March 29 with peers claiming that Britain will not receive any share of the profits that the EIB has accumulated, nor any interest or dividends.
Under the prime minister’s Withdrawal Agreement, the UK will receive the 3.5bn euros (£3bn) of capital it has paid into the EIB but is set to miss out on profits amounting to 7.6bn euros (£6.6bn).
The report published by the Lords EU Financial Affairs Sub-Committee identifies the impact Brexit has already had on the benefits the UK receives from the EIB. In 2016, it lent a total of 7bn euros for 54 projects – this has dramatically dropped to 1.8bn euros for 12 projects in 2017 and just 932m euros for 10 projects last year.
The committee has used its report to argue that Britain should give "swift and serious consideration" to creating a state-backed infrastructure bank to replace funding the country will lose.
Chair of the committee, Baroness Falkner of Margravine, said: “For the last 45 years the UK has relied on the European Investment Bank to invest in all manner of vital infrastructure projects such as Crossrail, London’s ‘Super Sewer', the expansion of Manchester’s tram network and Scotland’s Beatrice offshore windfarm. 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.”
Responding to the Lords EU Financial Affairs sub-committee report, a National Infrastructure Commission spokesperson said: “Today’s report echoes the findings in our National Infrastructure Assessment - the first ever for the UK - and the need to maintain investment in our infrastructure. Like the committee, we’ve recommended that, without access to the European Investment Bank post-Brexit, an alternative financial institution will be needed. In its interim response to our assessment, the government confirmed there would be a review of infrastructure finance starting in late 2018 – we look forward to seeing soon how that will address this pressing issue.”