The EU bank funding Theresa May’s flagship “Midlands engine” project is to make it tougher for large British infrastructure projects and City of London investors to access its multimillion-pound loans in light of the continuing uncertainty caused by Brexit.
The board of the European Investment Bank has concluded that extra checks on applications from UK projects are necessary from now on given the “unprecedented situation”.
Sources close to the bank, whose shareholders are the 28 EU member states, said its management would be seeking assurances on a range of issues when UK-based applications are received, including on whether projects will retain the high level of environmental regulations currently enforced by EU law.
The EIB, of which Britain has been a member since 1973, only lends to projects that its board is convinced are financially viable in the long term, but also that meet expectations in terms of environmental footprint and the treatment of workers.
While the bank also lends to non-EU nations, 90% of loans go to member states. Consideration is being given to the prospect of allowing the UK to remain a member after Brexit, but that would require a change to the bank’s constitution.
The bank has made loans of more than £52bn in the past decade to UK-based projects, including £5.5bn last year supporting schemes such as schools, universities and new hospitals.
The decision of the management board will have an impact on both funding for infrastructure projects and lending by the European Investment Fund, a public-private partnership of which the EIB is a majority shareholder. The EIF accounts for more than a third of investment in UK-based venture capital funds, whose clients include entrepreneurs and creative startups.
A source close to the EIB said: “The decision that was taken by the management board was to continue engagement in the UK, but look carefully to make sure of our long-term investments both on the infrastructure side and equity side, where lending agreed now will continue after the withdrawal date.
“They need to make sure, for example, on the environmental side, as with all investments inside and outside Europe, that the standards are maintained and the mechanisms are in place to cover what remains a large list of potential uncertainties.”
The source added: “Things are not being stopped. Things are progressing. But there needs to be more detailed due diligence given the unprecedented situation.
“We need to make sure things are done properly. Engagement is continuing, but clearly things need to be taken into account and there could well be what is seen as delays.”
Most recently, a £122m EIB loan was agreed for the “Midlands engine”, a proposed renewal of the infrastructure around Birmingham. The prime minister has claimed it will become “an engine for growth” to rival George Osborne’s “northern powerhouse”.
Tim Farron, leader of the Liberal Democrats, said the prime minister should accept responsibility for the development. He warned that any hitch could lead to unacceptable delays for projects, and a loss of jobs.
He said: “News that investment in Britain is being held up can be laid firmly at the door of Theresa May. Because she has chosen to go for an extreme version of Brexit, it is hardly surprising that the European Investment Bank fears that this cold, heartless Conservative government will slash environmental protection.
“Indeed, many on the Tory right have openly called for this. Theresa May’s decision will be paid for in British jobs, but she doesn’t seem to care.”
Michael Collins, chief executive of Invest Europe, which represents Europe’s venture capital sector, said the delays to signing off lending to his members should worry everyone across the EU.
He said: “The man on the street both in the UK and across Europe should care if we are looking for venture capital to back the entrepreneurs and start-ups. If the EIF is not making its normal commitments there is a gap in investment. The EIF is probably the single biggest investor in venture capital in Europe.”
The EIF accounted for more than a third of investment in UK-based venture capital funds between 2011 and 2015, and is regarded as a key institution offering both cash and credibility to those to whom it lends.