A new £50 billion scheme to guarantee investment in infrastructure projects and British exports has been launched by the Government to help boost the economy.
The UK Guarantees scheme will underwrite £40 billion of infrastructure projects which may have stalled due to difficult credit conditions, including transport, energy, broadband, water and flood defences. A further £5 billion will be guaranteed to struggling exporters.
The Government said it was able to launch the scheme because of its 'hard-won fiscal credibility' which will be passed on to support the UK economy.
The first infrastructure projects are expected to be awarded in the autumn and will qualify for the scheme providing they meet five key criteria;
- Be deemed 'nationally significant' as identified in the Government's National Infrastructure Plan 2011. Other 'exceptional' projects of national or economic significance may be considered on a case-by-case basis
- Be ready to start in the next 12 months following a guarantee being awarded
- Be financially credible and willing to accept appropriate restructuring of the project to limit risk
- Be wholly dependent on a guarantee to proceed and not otherwise financeable within a reasonable timeframe, and
- Assessed by HM Treasury to be deemed as 'good value' to the taxpayer and make a positive impact on economic growth.
As part of the scheme, a temporary lending programme worth an estimated £6 billion will be allocated to help public-private partnerships (PPPs) who have failed to secure the required amount of private lending to go ahead. PPPs had previously only been able to raise finance from the private sector.
Up to £5 billion will be directed towards exports, providing long-term loans for overseas buyers of UK exports at competitive rates. UK Export Finance will begin supporting loans by the end of the year with hopes of lending to sectors such as aerospace, oil and gas extraction equipment, transport and telecommunications infrastructure services, hospital construction and management services, and sports infrastructure.
CBI director general John Cridland said: "Investment and exports will be the dual drivers of future growth in the UK and this scheme should help fire up both engines."
"We are not alone in seeking growth through exports - our European neighbours are competing to break into the same high-growth markets. Offering loans to foreign buyers will make UK exports more attractive and help more firms enter new markets," he added.
Elsewhere, the Bank of England and the Treasury launched the Funding for Lending Scheme designed to boost bank lending. Banks and building societies that increase lending to households and businesses will be able to borrow more capital from the FLS and at lower costs than those that scale back lending.