The government has unveiled plans for a new scheme that will underwrite up to £40bn worth of infrastructure projects that have stalled because of adverse credit conditions.
In a statement from the Treasury, it said that it would use the government’s “hard-won fiscal credibility” to release private sector investment.
The scheme, UK Guarantees, will accept applications from today from projects that are ready to start now or within the next 12 months from a potential government guarantee being given.
In addition to the underwriting, a new temporary lending programme will enable around 30 public private partnership infrastructure projects worth an estimated £6bn to go ahead in the next 12 months.
In addition, a £5bn export refinancing facility will be available later this year to support British exporters by ensuring that overseas buyers have the long-term funding they need.
The announcements come as the infrastructure and construction sectors have faced a tumultuous and uncertain period over recent months.
“Britain’s credibility has been hard-won and involved difficult decisions, so I want to make sure its benefits are passed on to the whole economy,” said chancellor George Osborne.
Major infrastructure projects
Under UK Guarantees, the Government will aim to ensure that where major infrastructure projects are struggling to access private finance because of adverse credit conditions, these projects can go ahead.
Applications can be made from today to Infrastructure UK, the HM Treasury body focused on prioritising and enabling investment in UK infrastructure.
Around £40bn of projects could qualify for the provision of guarantees. These projects could come from a range of sectors including transport, utilities, energy and communications. Eligible projects will be subject to charges, due diligence and as a minimum must meet five key criteria:
- Nationally significant, as identified in the Government’s National Infrastructure Plan 2011. The Government will also consider other exceptional projects of national or economic significance on a case-by-case basis, such as university infrastructure;
- Ready to start construction within 12 months from a guarantee being given and having obtained (or about to obtain) necessary planning and other required consents;
- Financially credible, with equity finance committed and project sponsors willing to accept appropriate restructuring of the project to limit any risk to the taxpayer;
- Dependent on a guarantee to proceed and not otherwise financeable within a reasonable time frame; and
- Good value to the taxpayer, assessed by HM Treasury to have acceptable credit quality, not present unacceptable fiscal or economic risks and to make a positive impact on economic growth.
The Government will consider the most effective form of guarantee on a case-by-case basis using a robust assessment and approvals process.