New lending to Britain by the European Investment Bank fell almost two-thirds last year as uncertainties over Brexit made applicants wary and the bank imposed extra precautions.
The Luxembourg-based EIB’s new contracts with the UK totalled £1.89bn last year, down from £5.54bn in 2016. Just one-fifth of last year’s total — £377m — came in the nine months after the British government triggered the Article 50 process to leave the EU.
Werner Hoyer, EIB president, said one reason for the slowdown was promoters of UK projects “asking twice” before entering into agreements with the EIB, because of Brexit. Another factor was the extra legal work the bank now had to do to make sure its assets in Britain would be protected after the UK leaves the EU.
Mr Hoyer warned London’s exit from the bank would be a blow to both parties given the bank’s “key” role in backing important UK projects in sectors from transport to energy.
Mr Hoyer said he would not “interfere” in talks on the future relationship between the EU member state-owned EIB and the UK, which has said it wants continued access to the bank’s funds.
But he said UK withdrawal from the EIB would be “quite a blow” to the bank and also be damaging to the UK, which he noted did not have a well-established state institution dedicated to development finance.
“I think we will leave a gap in financing in the UK and therefore it’s a very, very painful thing,” he said at an event to review the EIB’s performance last year.
The EIB has already found itself caught in the Brexit crossfire, after the UK threatened it would have to secure a banking licence and would lose its immunities from taxation and expropriation. The EU’s 27 other member states have for their part demanded the UK pays upfront for billions of contingent liabilities on the bank’s books.
The EIB has welcomed a December announcement by the European Commission and the UK that they had reached provisional agreement on repayment of the UK’s capital and British guarantees for the bank’s investments in the UK. The nature of the future UK-EIB relationship was left open.
The EIB has backed UK infrastructure projects ranging from Crossrail in London to new secondary schools in Yorkshire. Deals signed last year included projects for water in Wales and gas in Northern Ireland, as well as two regional business investment funds.
Mr Hoyer expressed hopes that agreements would be reached so the EIB could continue to be seen as a “reliable partner” in the UK. Under existing EU law, the UK would have to end its 16 per cent shareholding in the bank once it leaves the union.
“There is a lot in the pipeline if the contractual arrangements and the other talks we have with the United Kingdom continue to run positively,” he said. “I think we will arrive at satisfactory results also in the eyes of our partners in the UK government.”
While the EIB president was careful to avoid straying beyond his mandate into the sensitive talks on the future relationship between the UK and the EU27, he made no secret of his dislike of Brexit.
“This is still for me, to be quite blunt, the most terrible decision that has been taken in 2016 — with the exception of one more that year,” said Mr Hoyer, a former politician from Germany’s Free Democratic party. “And it is painful in my view. It has negative effects for citizens on both sides.”
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