UK local government to miss out on European infrastructure cash post-Brexit

11 Jun 18

Local authorities in the UK are demanding their government clarifies how it will fund infrastructure after they lose billions of pounds from the European Investment Bank following Brexit.

The government should provide immediate assurances about where councils can access equivalent lending alternatives, especially to meet affordable housing needs, the Local Government Association said today.

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 EIB that supports vital investment in our communities is one aspect that needs to be addressed.”

As a member of the European Union, the UK has had access to EIB loans and guarantees, which helps fund the development of small and medium enterprises and major infrastructure such as housing.

But under the draft withdrawal agreement between the UK and the EU, from the beginning of the transition period next year the UK will no longer be eligible for billions of pounds worth of EIB funding reserved for member states, says the LGA.

The association said the government should also allow councils to self-finance new homes, lift the housing borrowing cap, and use 100% of the receipts from “Right to Buy” sales to invest in new homes.

Since the vote to leave the EU, there has been a significant decline in applications to the EIB for support to invest in UK infrastructure, the LGA said.

Since the referendum in June 2016, only 39 deals between the EIB and the UK worth just under €3.1bn have been finalised, compared to 74 deals worth €13.5bn in the previous 18 months.

Although the government has already launched initiatives, such as the British Business Bank in 2014 to support SMEs, it has made no assurances that it will match sums coming from the EIB.

Investments from the European bank include a €1bn loan to the Housing Finance Corporation to expand the Affordable Housing Finance Programme, which will build over 20,000 affordable homes in the UK.

The bank has also provided a €700m loan to part fund the Thames Tideway, which will improve sewerage infrastructure.

House-building in the UK is already significantly behind the government’s target of 300,000 new homes a year, the LGA said.

Bentley said: “Major affordable housing developments and large infrastructure projects, as well as smaller investments and SMEs, have benefited enormously from this access [to EIB funding].

“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.”

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