What the UK Infrastructure Bank’s first Strategic Plan means for business

The UK Infrastructure Bank was launched in 2021 to drive investment in infrastructure across the UK, help the country tackle climate change, and promote growth across regions and communities.

Following discussions with stakeholders, including CBI members, the Bank has published its first Strategic Plan, which adds clarity on the Bank’s role. More detail is expected to come over the next year, especially on its mechanisms for ensuring it does not crowd out private capital, on measuring impact and on specifying its role within energy efficiency.

Although the Bank has identified multiple sectoral priorities in its discussion paper, the portfolio will mainly focus on clean energy, transport and digital. Water and waste are likely to be the smallest sectors, but the CBI believes this may change when the Bank identifies more investment opportunities and will work with our water and waste members to see how this could be done.

Where the Bank sees its biggest priorities

In clean energy and power, the Bank will look to:

• Finance the transition of mature renewable technologies to subsidy-free business models
• Finance the deployment of new technologies for renewable power generation
• Explore how the Bank can support the regulated asset base (RAB) model in attracting private finance into nuclear projects
• Finance flexibility and storage technologies, such as battery projects.

One of the subcategories which has significantly changed is energy efficiency, raised in the Chancellor’s Strategic steer to UKIB. It will now consider financing projects or technologies that support energy efficiency, including the retrofit of existing homes and buildings, and/or the decarbonisation of heating, in line with the government’s Heat and Buildings Strategy. The CBI welcomes that the UKIB now has energy efficiency in its remit, but it encourages the Bank to explain more whether it will consider retrofit of wider infrastructure, or only buildings in the foreseeable future.

Transport is considered another key sector for UKIB. The Bank will consider financing:

• Electric vehicle charging infrastructure, working with both local authorities and private providers
• Adoption of zero emission buses by local authorities
• The procurement of green rolling stock
• Port infrastructure, particularly where it supports green industries
• Mass transit systems and infrastructure upgrades.

The third priority sector is digital, with UKIB planning to finance the roll-out of gigabit capable broadband, particularly to harder-to-reach areas, and to monitor 5G roll-out and help finance any emerging capacity gaps. The CBI will be highlighting to the Bank that it is crucial it does not unintentionally crowd out private capital in this sector and makes sure the gaps cannot be fixed by existing private investors.

UKIB’s disclaimer about potential contradictions in key ambitions

One of the challenges the Bank is facing is that its investment deals might contradict one of its key ambitions such as tackling climate change or promoting regional growth. The Strategic Plan sets out that where an investment is primarily to support economic growth, the Bank will ensure that it “does not do significant harm against the climate objective”. However, the CBI will be asking the Bank to define what ‘significant harm’ means in this context, to make such a statement more accountable.

The CBI and UKIB continue to work together

Whether you are an investor, insurer, adviser, or but are just interested in infrastructure finance, the CBI will continue to represent you in shaping the Bank’s continuously evolving strategy.

The Strategic Plan clearly states that UKIB will be engaging in conversations with investors, borrowers, advisers, local authorities as well as public sector bodies. The CBI welcomes such a collaborative narrative and will work with the Bank to help connect their staff with CBI members who are keen to help shape the institution’s approach. We will be reaching out to members to discuss your thoughts and comments, so that we can feed back to the Bank. If you’d like to get involved, email Kate in the CBI Policy Unit.