Brexit threatens UK project funding
The fallout from last week's vote to leave the European Union is rattling business and finance, far and wide. One aftershock is being felt at the European Investment Bank.
The EIB is owned by the 28 member states of the EU. The UK, alongside Germany, France and Italy, is among its largest shareholders, with about 16%.
The bank provides finance to a wide range of projects around Europe, with a particular focus on areas like infrastructure, social housing, renewable energy and education. It invested £5.6bn (6.7bn euros) in the UK last year and has ploughed £42bn (50bn euros) into the country over the last decade.
But after the Leave vote, there may already be a freeze descending on some new investment.
The good news is that the EIB says that its recent deals in the UK should proceed as planned. Those include funding to an automotive parts business in County Durham, to Swansea University, to housing associations in Northern Ireland and to an off-shore windfarm in Scotland.
But the EIB told Newsnight that the uncertainty created by the vote to leave the EU means that some UK projects, which previously would have stood a good chance, are now less likely to be approved.
There are reasons why the EIB might be cautious. It is unclear whether the UK could or would remain a shareholder after it leaves the EU. That might depend on the form of its relationship with the remaining 27 members. The situation is unprecedented and the EIB's statue doesn't contain any guidance or provisions for a shareholder leaving the EU.
Where does the money go? EIB lending to UK 2011-2015:
- Energy - 28%
- Transport - 25%
- Water, sewerage, solid waste, urban development - 25%
- Industry, services, agriculture - 7%
- Education, health - 11%
- Small and medium-scale projects - 4%
Meanwhile, an organisation dedicated to furthering the interests of the European Union, particularly around growth and job creation, might be wary of committing more funds to a country that has just voted to leave the group.
Some companies are already falling victim to that. Funding Circle, a London-based company that provides financing to small businesses, recently received £100m (120m euros) from the EIB.
The hope was that would expand into a £1bn (1.2bn euro) programme. But Funding Circle, after discussions with the EIB, now believes that is unlikely.
The EIB also told Newsnight it would be particularly cautious when looking at longer-term financing, such as for the water industry or big infrastructure projects. Those types of projects could still be on-going if and when the UK would be leaving the EU.
One project floated by the EIB was HS2, as an example of the type of long-term infrastructure project the bank considers. However, the latest plans suggest HS2 will be funded entirely by the government.
Another project sitting in the bank's pipeline is at Anglian Water. The company has been talking to the EIB about £400m (483m euros) of funding towards their investment programme, from 2015 to 2020.
Anglian Water said: "The European Investment Bank invests heavily in the UK water industry, not just Anglian Water," adding that it was "far too early to make any assumptions" about future EIB funding.
The company said: "We are continuing our discussions with the EIB, and it's worth noting that the UK is currently still a shareholder in the EIB and therefore eligible for consideration for finance."
Of course, the EIB's other 27 shareholders may not be minded to approve much money for the UK any time soon.