As part of his budget, the Chancellor Rishi Sunak outlined plans for a new UK Infrastructure Bank to be based in Leeds. HM Treasury has published the Policy Design of the Bank to outline more details of how it will operate. Here is an outline of the plans for the new institution.
The UK Infrastructure Bank is planned to complement the government’s other policy levers, infrastructure bodies such as the National Infrastructure Commission (NIC) and the Infrastructure and Projects Authority (IPA). It will also partner with the private sector and others.
The government wants the UK Infrastructure Bank to provide leadership to the market in the development of new technologies, crowding-in private capital and managing risk through cornerstone investments and a range of financial tools. It can bolster the government’s lending to local government for large and complex projects and help to bring private and public sector stakeholders together to regenerate local areas and create new opportunities.
The Bank will be established in phases. The government will publish a framework document later in the spring ahead of the Bank’s launch setting out further details on its operations. The Bank will be a long-lasting institution with a high degree of operational independence. From its inception, its core objectives will be to help tackle climate change, particularly meeting the country’s net zero emissions target by 2050; and also support regional and local economic growth through better connectedness, opportunities for new jobs and higher levels of productivity.
In total, the Bank will have £22 billion of financial capacity to deliver on its objectives. This will consist of £12 billion of equity and debt capital and the ability to issue £10 billion of guarantees. It will draw capital from HM Treasury and will be able to borrow from private markets. It will also grow through recycling and retention of return on investments. The government will allocate capital to the Bank in phases in line with its institutional development.
The Bank will focus on intervening where it can make the biggest impact. This means addressing shortfalls in the provision of private finance to make projects happen that would otherwise not have had the necessary support. Acting as a cornerstone investor, it will leverage private sector finance into underdeveloped or challenging markets.
The Bank will be headquartered in Leeds and will operate across the entire United Kingdom.
Its primary focus will be on the economic infrastructure sectors covered in the National Infrastructure Strategy, including clean energy, transport, digital, water and waste. In addition, it will also be able to lend to university projects that generate a return to support regional and local growth. The Bank will also play an important role in supporting and developing early-stage technologies.
The Bank’s local government lending will focus on broadly the same sectors. The Bank will offer advice and expertise to help deliver better projects and support the ambition of local authorities.
The government will publish a set of investment principles later in the spring to help the Bank assess whether a project is in scope. The Bank will develop its own metrics and decision-making framework for assessing projects. It will make independent decisions on investments.
The Bank will be owned by the government and will ultimately operate as a separate institutional unit at arm’s length and with a high degree of operational independence. HM Treasury will be the sponsoring department.
The Bank will begin operating in spring 2021 in an interim form and then ramp up its activities over the coming months. The government will publish a framework document ahead of the Bank’s launch, setting out further detail on governance and the relationship with government.