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24 September 2019

Funding our future: the case for a UK infrastructure investment bank

Mott MacDonald has published ‘Funding our future’, a report studying the need, feasibility and governance of a UK infrastructure investment bank.

Funding and financing infrastructure, despite its obvious contribution to economic, social and environmental wellbeing, is a stubborn challenge. The long-term nature of returns on the capital expenditure, plus the broad benefits they supply to society, mean that markets do not always find these investments attractive.

The report outlines the history of UK infrastructure finance, including the loans received from the European Investment Bank (EIB) which peaked at €7.8bn before the EU referendum in 2016 and have fallen swiftly since. The UK’s membership of the EIB is likely to be lost once it leaves the EU.

With the government no longer supporting Private Finance Initiatives amidst its criticisms, the UK’s capital expenditure, which is projected at around £30bn per annum until 2050, faces a significant investment gap.

The report considers cases studies of national infrastructure investment banks established as far back as 1948, drawing lessons to be applied to the UK’s situation. Such a bank, the report suggests, should have clear strategic objectives consistent with the wider government agenda, offer strong ‘additionality’ to avoid crowding out private investment and carefully manage the risks to the taxpayer.

Paul Hammond, global practice leader for Infrastructure Development and Economics at Mott MacDonald, said: “Brexit has brought the issue of infrastructure investment to the fore. The National Infrastructure Commission has done a great job setting out the pipeline of UK investments required to meet the challenges of inclusive economic growth and climate change. Post membership of the European Investment Bank, our report sets out a baseline and ideas for a future UK Investment Bank. Key issues include ‘off balance sheet’ for the public sector and additionality rather than competition with private sector investors.”

To view our “Funding our future: the case for a UK infrastructure investment bank” publication click here

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