Philip Hammond has unveiled plans to expand the UK government’s financial support for infrastructure projects which are likely to lose access to European Investment Bank (EIB) funds following Brexit.
The chancellor of the exchequer set out his intentions in his Mansion House speech this morning. The address was delayed from last week in the aftermath of the Grenfell Tower fire tragedy.
To ensure the continued availability of finance after Brexit, Hammond announced an expansion of the support for infrastructure capital funding in the UK.
He said the government will “broaden the range” of the UK Guarantees scheme, under which the government underwrites lenders to infrastructure projects.
Lenders to projects, like wind farms and interconnectors, will be offered construction guarantees “for the first time”, the chancellor said
Alongside an expansion of the guarantee scheme, he said is in talks with the EIB to ensure UK businesses and projects continue to benefit from its funding for as long as Britain is a member of the EU.
Hammond acknowledged that the EIB has been “an important source of funding for infrastructure investment” in the past. He added that this should continue on “equal terms” for the UK until its official EU exit.
A report on the implications of leaving the EU, published by the House of Commons energy and climate change select committee last year, found that the EIB has provided the UK with “substantial funding for energy infrastructure projects” including €9 billion in long-term loans over the past five years and that Britain had been the biggest recipient of the bank’s renewable energy and energy efficiency bonds.
Michael Grubb, professor of international energy and climate change policy at University College London, told a seminar in May that post-Brexit UK interconnectors could find themselves competing for funds with overseas projects after Brexit. Foreign schemes will likely be able to command lower borrowing costs thanks to EIB access, he warned.
Hammond also said in his speech that the government remained committed to its plan for a modern industrial strategy, which it consulted on prior to the general election announcement.