The Government
should set out how it will make equivalent lending alternatives to the European
Investment Bank available in England after Brexit, the Local Government
Association has said.
As a member of the
European Union and a shareholder contributing into the EIB, the UK currently
has access to the EIB’s loans and guarantees, which typically help fund small
and medium-sized enterprise (SME) development and major infrastructure loans
such as housing. The UK has been the fifth largest recipient of the EIB.
The EIB typically
offers a cheaper long-term source of finance than is available from many
private equivalents, and is often willing to invest in slightly higher risk
projects than many commercial lenders, whilst providing greater protection to
the public element of the investment.
Under the UK/EU
draft withdrawal agreement, from the beginning of the transition period next
year, the UK will no longer be eligible for billions of pounds worth of EIB
monies reserved for EU members.
Existing projects
should continue, however there is also evidence that since the Brexit vote,
there has been a significant decline in those seeking EIB support for investing
in UK infrastructure. Since the EU referendum, only 39 deals with the UK
(collectively worth just under €3.1 billion) have been finalised. In the 18
months before, there were 74 deals, (collectively worth over four times as
much, €13.5 billion).
While there have
been initiatives on the UK side, such as the launch of the Government-owned
British Business Bank in 2014 to support SMEs, there is as yet no detail or
assurances that it will match the significant sums currently coming to the UK
from the EIB, or the favourable conditions as regards supporting higher risk
projects.
Examples of EIB
investment are:
- The Housing Finance
Corporation has secured a
€1 billion loan from the EIB to expand the
Affordable Housing Finance Programme which will build over 20,000
affordable homes in the UK across diverse areas such as Wigan,
Scarborough, Bradford and Cambridge. - The EIB has provided a
€700 million loan to part fund
the Thames Tideway (pictured above), which will improve the sewage infrastructure of the
Thames and is the largest investment of its kind in the UK.
Housebuilding is
already significantly behind the target of 300,000 a year that the Government
has set and losing access to EIB funding could make this even more difficult to
achieve.
The LGA is therefore
calling on the Government to provide immediate assurances that equivalent
lending alternatives will be made available to councils and SMEs, and for the
Government to allow councils to self-finance new homes, lift the housing
borrowing cap, and allow councils to use 100 per cent of the receipts from
Right to Buy sales to invest in new homes.
Cllr Kevin Bentley,
Chairman of the LGA’s Brexit Taskforce, said: “The UK’s exit from the EU will
have a significant impact on local government, creating challenges that need to
be addressed but also opportunities to do things differently.
“Losing access to
cheap long-term financing from the European Investment Bank that supports vital
investment in our communities is one aspect that needs to be addressed.
“Major affordable
housing developments and large infrastructure projects, as well as smaller
investments and SMEs, have benefitted enormously from this access. Councils are
raising legitimate concerns that losing this funding source could result in a
reduction of housing developments, council tax receipts and overall revenue of
councils that is used to fund essential services.
“The LGA is calling
on the Government to provide immediate assurances that equivalent lending
alternatives will be made available to councils and SMEs as well as allowing
councils to self-finance new homes, lifting the housing borrowing cap, and
allowing councils to use 100 per cent of the receipts from Right to Buy sales
to invest in new homes to help mitigate the potential problems currently faced
by access to the EIB being reduced.”
