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The UK's new infrastructure bank will offer annual loans and investment worth two-thirds less than its EU predecessor, the Treasury’s independent forecaster has said.
Rishi Sunak, the Chancellor, announced in the Budget that he was introducing Britain’s first ever infrastructure bank to help finance investment in green industries across the nation.
“Located in Leeds, the bank will invest across the UK in public and private projects to finance the green industrial revolution,” he declared.
Mr Sunak said the bank would have an initial capitalisation of £12 billion and was expected to support at least £40 billion of total investment in infrastructure.
It will extend loans, equity financing and guarantees to fund projects that will help tackle climate change and support regional and local economic growth.
The Office for Budget Responsibility (OBR) highlighted that the Treasury has placed a cap on the bank’s capital over the next five years that amounts to £12 billion in actual liabilities, to finance loans and equity, and a further £10 billion in contingent liabilities, in the form of guarantees.
It noted the Government forecast that the bank would lend and invest around £1.5 billion a year.
It compared this with the European Investment Bank, which lent an average of £5 billion a year to UK projects in the five years prior to the EU referendum in 2016. Lending plunged after the vote.
The financing provided by the UK infrastructure bank will be equivalent to around a third of that offered by the EIB before the referendum, the OBR said.
Britain joins a well-populated club of countries that have national investment banks. Germany boasts one of the largest and oldest. Kreditanstalt für Wierderaufbau (KfW) had total assets of €506 billion, or 14.7 per cent of Germany’s GDP, in 2019.