By gaining more flexibility and independence, leaving the EU has the potential to drive forward a new age for UK business in helping to build infrastructure globally.
The United Kingdom has a number of world-leading commercial organisations with reputations for excellence developing infrastructure globally. However, the approach taken by the EU to develop infrastructure both domestically and internationally has directed resources in an inefficient, non-productive and wasteful manner that has fostered a dependency on the taxpayer to fund non-commercially viable projects.
Leaving the EU is an opportunity for the UK to lead a new approach to infrastructure development that harnesses the advantages and strengths of the private sector, partnering the financial power of the City and British business expertise while decreasing reliance on taxpayer funds.
The fact remains though that infrastructure development in many countries has proven challenging. This has been due to a variety of reasons, but the two key areas seem to be both political and financial.
The main concern is basically risk: too many countries have had infrastructure projects that have failed due to a lack of political, commercial or legal stability and, combined with issues surrounding the credit ratings of many countries, it has been hard to see the day where private sector investment trumps taxpayer investment.
This has led to huge taxpayer liabilities for some of the poorest nations in the world (some of whom do not have credit ratings to attract finance) and the resulting influence of governments such as the UK and its taxpayer, driven through the EU network, providing finance for often commercially unviable projects.
The result has often been a set of opportunities for the EU to develop its own diplomatic and financial credentials with non-EU nations. Ever since the Treaty of Lisbon, the EU has been developing its own Foreign Affairs bureau and extending its influence beyond its borders. To help achieve this, the EU has opened embassies across the world (from the get-go) to spread its agenda – an agenda that often ran contrary to the UK’s.
As a case in point, the EU gave over €1bn to President Assad before the escalation of conflict in Syria. This is just one example of how the EU’s spending went contrary to the UK’s best interests, as illustrated by one of my submissions to the Government’s Balance of Competences Review in 2013 during my time at The Freedom Association.
However, in the world of infrastructure finance, the same remains true. In the case of Syria, the European Investment Bank (EIB) has given the Assad regime loans of over €900m since 2000. It has given many billions of loans to non-EU member states since its creation out of the €1 trillion plus it has loaned.
Within the EU markets, finance has been similarly poorly allocated. Last year for instance, the EU announced it was giving €1bn to fund upgrades to a ring road in Romania, €358 million towards refurbishing a rail network in Italy and €84 million to Germany for improvements to a university. This was part of a €4bn package.
The issue here is that the state remains dominant in investing taxpayer funds into non-commercially viable infrastructure projects. Further, although I’m sure there might be some benefits to those that receive the €1bn for some unspecified improvements to a ring road in Romania, there have been too many projects where British taxpayers have sponsored EU waste – and not just through the designated “infrastructure finance projects” (the Common Agricultural Policy is a notable example).
It does seem that the EU is changing its ways (in some respects). The EU External Investment Plan aims to use €4.6bn in taxpayer funding to raise €40bn+ in private sector leverage credit for non-EU nations. Coupled with the EU’s credit rating and the ability to borrow at very low interest rates, this will bring various benefits including decreasing the obligations on taxpayers and increasing the involvement of the private sector in infrastructure development.
Yet, as a newly independent nation with arguably the world’s global financial hubs located within it, couldn’t the United Kingdom do more to enhance the availability of private and commercial finance that can be put towards global infrastructure development? Of course it could.
The UK has already made a number of steps towards doing so at the UK-Africa Investment Conference earlier this year. These include a collaboration with the City of London to launch a range of new bonds, competitions and platforms that look to enhance UK co-operation with African nations, and the involvement in UK businesses in building the infrastructure of the future.
The above initiatives, combined with the prospect of new free trade deals with nations across Africa (another thing the UK couldn’t do inside the EU), give the UK an enhanced position in terms of leveraging its relationship and advantages to the benefit of business – both in the UK and across the world. Further, by using the City to both mitigate risk more efficiently and to leverage capital efficiencies, taxpayer exposure – both British and otherwise – to build these infrastructure projects could be minimalised and they become more commercially viable.
Tellingly though, a key takeaway from the UK-Africa Investment Conference was that the UK has concentrated on enhancing cooperation in energy and, to some extent, FinTech. These are just two exampleswhere the UK government can, outside the EU, concentrate on promoting areas that matter to the UK – not to other EU nations.
This flexibility could give UK businesses first mover advantages. Combined with support from the private sector in the UK and elsewhere (the US for example), leaving the EU has the potential to drive forward a new age for UK business in helping to produce commercially viable infrastructure projects that enhance cooperation and opportunities globally.
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