The European Investment Bank (EIB), the long-term lending institution owned by the member states of the EU, dealt a blow to Northern Ireland’s plans for an investment fund, the Irish News reported on Friday.
Northern Ireland had hoped that the bank would serve as a cornerstone investor for its investment fund, leveraging a significant portion of up to £40m ($49m) in match funding from EIB.
But Werner Hoyer, president of the institution, has now sent a letter to the country’s finance minister Máirtín Ó Muilleoir saying the UK’s decision to leave the EU will mean that EIB is unable to support the fund in any way.
The fund was first announced in Northern Ireland’s draft executive budget for 2015-16 primarily to provide capital for private sector infrastructure projects. Northern Ireland had been in discussions with the EIB over a contribution since February 2015, when then finance minister Simon Hamilton said: “We hope that [£40m executive funding] will leverage in additional finance from, first and foremost, the EIB, which we have been working with incredibly closely on this project from roughly this time last year.
“I pay tribute to the EIB for its engagement and work in the genesis of the fund and throughout the last year.”
Hoyer made clear that the EIB can offer only advisory support to help establish the fund. The decision, while not necessarily surprising, is still interesting as the EIB does invest outside EU member states to represent the union’s interests.
The EIB’s activities span the European Free Trade Association as well as so-called enlargement countries – nations that are potential candidates for joining the EU – the Mediterranean, neighbouring eastern countries, sub-Saharan and south African nations, the Caribbean and Pacific region, central and wider Asian countries and Latin America.
The EIB, as noted in an editorial in September, is facing tough conditions itself in the future as the UK is a significant contributor to its capital assets.
At the time, Hoyer said: “We will have a few years of uncertainty ahead of us during which it will not be clear what will happen to Great Britain and its relation with the European Union. And depending on this is, of course, the question of what the relation between Britain and the European Investment Bank will be.”
Although Northern Ireland remains confident it can still deliver the fund, the news comes amid a weekend of bad news for the UK. The pound crashed to a two-month low this morning against the dollar and the euro – down 18% since June’s vote – following statements by prime minister Theresa May yesterday that she was determined to prioritise immigration control over access to the single market, an approach dubbed hard Brexit and regarded by industry and the financial sector as being potentially catastrophic to the UK’s economy.
The failure of Northern Ireland to secure the EIB as an investor for its fund marks the first time such a major government venturing deal has fallen apart since June 2016.
In November, the £145m North East Fund signed up the EIB and the European Regional Development Fund (ERDF). That same month, Scotland’s state-owned investment firm Scottish Enterprise warned that leaving the union would mean losing access to funding from the ERDF, a major contributor to the organisation’s coffers.
Kerry Sharp, head of Scottish Enterprise’s investment arm, Scottish Investment Bank, warned at the time: “Maybe our model has to change, maybe we provide less funding if we do not have funding. Maybe it is more an advice role and a support role. We need to be open to all sorts of ways [to progress]. The desire is still there, we just have to be clever about how we are going to achieve that.”
Since Sharp’s statement, Scotland’s first minister, Nicola Sturgeon, has increased her calls for Scotland to remain in the single market and threatened May with a second independence referendum if those calls are ignored.
While some of the doom and gloom of an earlier editorial immediately following the Brexit vote may not have come to pass – fintech developer Number26 has in fact expanded to the UK, for example – it is important to note that at the time the EIB’s European Investment Fund (EIF) said it would not change its statutory remit for the time being. With the EIB now doing exactly that, it remains to be seen for how much longer the EIF will stick to its promise.
The EIB’s decision to remove itself as a potential limited partner from the Northern Ireland Investment Fund signals the beginning of the systemic changes the UK investment landscape is facing, and that commitments from the UK’s chancellor Philip Hammond to offer more funding are barely a drop in the ocean.
With the prime minister still refusing to lay out her plans for the country’s future relationship with the EU – and a judgement by the Supreme Court expected this month on whether May actually has a legal right to trigger Article 50 without the consent of parliament or the devolved nations – it is anyone’s guess just how big that ocean might turn out to be. But the EIB’s move does not bode well.