One of the most damaging economic effects of Brexit is the loss of access to financing in the UK by the European Investment Bank, the world’s largest multilateral financial institution. During the UK’s European Union membership, the EIB invested some £150bn into UK projects, mainly in large-scale infrastructure, including the Channel Tunnel, the Second Severn Crossing, the Manchester Metrolink Extension, the water industry and rail track renewal across most regions of the country.

Since the 1997 Amsterdam Treaty, the EIB has also extended lending to projects in ‘human capital’ such as schools, universities, hospitals and social housing. More recently, it has rebranded itself as the ‘EU’s climate bank’, with the aim of dedicating 50% of its investments to climate action and environmental sustainability.

In 2016, the last year of full UK EU membership, the EIB lent £7.5bn to the UK. Since the bank, on average, lends about a third of total project cost – to act as a catalyst to other long-term joint lenders – this sum represents two to three times the total project investment involved.

The Chancellor of the Exchequer placed heavy emphasis on economic growth in the October 2024 budget and the investment necessary to achieve this. One of the principal instruments was the creation of a new National Wealth Fund of £7.3bn of which £5.8bn would be committed over the current Parliament in support of the newly created UK Infrastructure Bank. The government’s aim is that this, together with the recently established Development Bank of Wales and the Scottish National Investment Bank, will replace the investment that previously came from the EIB. This is highly ambitious.

While the NWF will provide an important new stimulus, the amounts lent by the new development banks combined are only a fraction of the annual EIB average from 2009 to 2016. The UKIB lent only £0.8bn against a target of £1.5bn in 2022. It lacks both the financial, engineering and market expertise that the EIB has built up over many years and critically, the EIB’s much larger access to the world’s capital markets.

As for the new Welsh and Scottish banks, their potential is limited. Not only are they not allowed to borrow on the capital markets, but they are also restricted to investing the annual amount they receive from the government.

Since the UK has left the EU, it no longer has automatic access to EIB lending. Moreover, Prime Minister Keir Starmer has stated that there will be no reversal of Brexit – ruling out re-entry to the single market and/or customs union – in his lifetime. Under its statutes, however, the EIB can and does, with the agreement of its governing bodies, lend for projects in non-EU member states. Such investment has amounted to only a small proportion of its total lending, and historically much of it took place in former French and British colonial territories, such as under the Lome Convention.

From the 1990s, however, substantial lending programmes were launched in a number of central and eastern European countries who were aspiring to EU membership. Legally, therefore, there is no bar to resume EIB lending in non-member UK if political agreement could be reached to this.

The attainment of such agreement would clearly be very difficult, to put it mildly. The EU is averse to ‘cherry picking’ and there would undoubtedly be a serious price to pay on the UK’s side. But the UK government is committed to a ‘reset’ of its trade and investment relationship with the EU and surely, at a time when likely global developments mean that we must move back closer to the EU, the possibility of at least some resumption of sorely needed EIB investment in the UK is worth setting as a negotiating aim. I am sure that the EIB, which still employs British staff and knows the British market very well, would itself much welcome such a development.

Brian Unwin was former President of the European Investment Bank (1993-2000).