The UK Infrastructure Bank has become the National Wealth Fund, as it looks to mobilise at least £70bn of private investment, according to the government.
Published yesterday (October 14), the policy paper for the National Wealth Fund laid out how the Labour government planned to deliver economic growth in the UK.
It announced that the fund would have a total capital of £27.8bn, combining UKIB’s existing capitalisation of £22bn with an additional £5.8bn being committed over this parliament.
The government previously announced that £7.3bn additional funding would be allocated through the fund however, it said the remaining £1.5bn has been “reserved to maintain flexibility in how the government can best deliver against its aims” for the fund.
Through the creation of the fund, Labour planned to increase the impact of public investment through public financial institutions by driving greater strategic alignment with this government’s missions.
It also looked to increase overall investment in the UK by equipping public financial institutions to mobilise greater levels of private capital, as well as improving access to investment support and information for investors, businesses and project developers.
Described as the UK’s ‘impact investor’, the fund will build on UKIB’s expertise to make investments that maximise the mobilisation of private investment with an expansion of UKIB’s offering.
This included an expanded suite of financial instruments such as performance guarantees and trialling new blended finance solutions, with government departments, that take on additional risk to facilitate higher impact in individual deals.
The National Wealth Fund will also:
- Have a larger amount of economic risk capital to free it from previous constraints which will be used to direct the fund’s investments towards having greater economic impact by taking risk in service of the government’s industrial strategy, clean energy mission and growth mission.
- Seek to make positive returns for the exchequer across its whole portfolio.
- Support the delivery of the wider industrial strategy in areas where an undersupply in private finance exists with at least £5.8bn of the fund’s capital focusing on green hydrogen, carbon capture, ports, gigafactories and green steel.
- Have increased resources and conduct more outreach to identify expanded project pipelines. While also not “crowding out” private investment.
- Have a “strong regional mandate to unleash the full potential” of cities and regions which will be reflected in its statement of strategic priorities and how it measures success.
- Work with mayors to support investable propositions in their local growth plans, devolved governments, and other local leaders to support their investment plans and priority sectoral clusters across the UK.
The government has said the fund will “help create the stable investment environment the market needs”.
Dr Rhian-Mari Thomas, chair of the National Wealth Fund Taskforce and chief executive of the Green Finance Institute said that combining UKIB with the National Wealth Fund created an opportunity for “simplification and scale”.
“We fully support the chancellor’s desire to de risk and accelerate private sector investment in the low carbon economy.
“We’re also pleased to see that the National Wealth Fund will take a proactive approach in trialling new blended finance solutions. This is a step change in identifying the innovative finance structure that best fits the investment,” she added.
alina.khan@ft.com
