Brian Unwin was President of the European Investment Bank from 1993 to 2000 and is now its Honorary President.
By virtue of its EU membership the UK is a shareholder and member of the European Investment Bank (EIB), the largest multilateral lender in the world, whose primary mission under the Rome Treaty is to promote the balanced economic development of the EU.
In recent years the EIB has invested around €5 billion a year in major projects in the UK in such sectors as transport, energy, environment, technical innovation, social capital (housing, health and education) and, through British banks, in small and medium sized enterprises. Projects have ranged from huge ones such as the Channel Tunnel, of which the EIB was the principal financier, the Jubilee Line extension on the London Underground, the London to Dover fast rail link and the second Severn crossing, to innumerable smaller road, rail, port, airport, energy generation and transmission, hospital, university, school and social housing projects. The bank has been particularly active in the environmental field – in the years following privatisation the UK water industry secured from the EIB most of the external finance necessary to bring Britain’s rivers, beaches and water supplies up to the required European standards. Since the EIB on average finances around a third of total project costs, its lending has generated annual investment of €15 billion (£13 billion) or more in the British economy.
If Brexit takes place, Britain will cease to be a shareholder and member of the EIB. By the same token it will lose its automatic eligibility to receive EIB loans for projects in Britain. This could only be reversed if the EIB governors (the EU finance ministers) decided unanimously to make an exception for the UK. This seems most unlikely to happen if the Brexit negotiations end in discord. Even if such an exception were made, the UK would be unlikely to receive any continuing priority in the EIB’s investment planning.
A similar situation will also apply to the European Investment Fund (EIF), of which the EIB is the major shareholder together with a range of European banks. The EIF is the EU’s principal supplier of venture capital finance, and provides about a third of the investment in the UK venture capital sector, which itself is the largest in Europe. To the alarm of UK venture capital entrepreneurs, the EIF has already put its activities in the UK on hold.
At a time when investment in the UK is flagging, the already dismal rate of productivity is declining further, the alarming current account deficit continues to widen, and the economy is moving towards recession, it seems an extraordinary act of self-harm to add to the wider damage that Brexit will inflict by depriving ourselves of the vital infrastructure and venture capital finance that the EIB and EIF provide. There is no alternative multilateral institution with the EIB’s financial muscle and expertise in infrastructure investment, and talk of establishing a UK equivalent has so far come to nothing.