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European Investment Bank freezes investment for British building projects

The European Investment Bank (EIB), which in 2016 financed nearly £7 billion worth of public infrastructure projects in the UK, has decided to put its UK operations on hold due to Brexit.

The decision to halt investment on British building projects was made after Article 50 came into effect last March. Since then, only three projects have received confirmed funding and there has been no financing for new projects since June, leaving the government with a severe shortage of funding for new schools, social housing, and hospitals.

Although the UK is a 16% shareholder in the EIB, the Bank is an EU entity, so Britain will pull out in 2019 unless ongoing membership is settled in the Brexit negotiations. An EIB insider stated that the group has a duty of care concerning projects that mature after that date, so careful due diligence must be exercised given the current circumstances.

According to public sector representatives, the freeze on investment for British building projects could both increase the cost of finance and delay the onset and development of new projects. The EIB is the biggest source of funding for Crossrail, housing association building programmes, and the priority schools building programme.

Housing Finance Corporation chief executive Piers Williamson said he did not expect any investment for British building projects in the near future. Conceding that the EIB had made significant financial contributions towards housing regeneration in Britain for over 20 years, he said that while existing contractual obligations will be met, the corporation will not be able to apply for any more funding at present.

A spokesman for Universities UK said that if the EIB is no longer considering applications from the UK before the latter even leaves the EU, it would create a difficult situation for universities. Funding has helped build modern learning spaces and research facilities that have made British universities internationally competitive.

Mr Hammond announced in July that the government was increasing options available to companies by bringing forward £400 million of new investment in the British Business Bank. Technology business representative Tech UK said that this money would not provide the same opportunities to its sector as the EIB or the European Investment Fund (EIF), which has stopped lending to the UK.

Energy UK chief executive Lawrence Slade said that the UK government needs to step in, as leaving the EU affects funding sources for energy projects. He stated that the government’s strategy needs to provide a predictable and stable framework that gives companies access to needed funds.

A spokesman for the Treasury said that it was working to resolve the situation. He said that companies should be able to access EIB investment for British building projects  for as long as the UK remained part of the EU.

He added that in the interim, action has been taken to support business investment by enabling the British Business Bank to offer construction guarantees on infrastructure projects and provide added support for venture capital funds.

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