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Door open for post-Brexit UK stake in EIB

We get a brief on the UK’s possible relationships with the lender and the European Fund for Strategic Investments once the country is now longer an EU member.

Werner Hoyer, president of the European Investment Bank, signalled at a presentation of the bank’s results last week that the lender might be open to keeping the UK as a shareholder after Brexit.

While at present only EU members are allowed to own a stake in the bank, a change in rules that would allow the country to remain a contributor and recipient of EIB money once its divorce with the bloc completes is not out of question, Hoyer was reported as saying last week in the Financial Times.

The EIB did not respond to a request for comment, but sources close to the bank told Infrastructure Investor that such a scenario could indeed be considered.

The UK, a 16.11 percent shareholder in the bank, received €6.9 billion worth of investment from the lender last year, making it the fifth-largest recipient of EIB loans. Over the past five years, the bank has plugged €31.3 billion in total into the British economy.

The country’s continued shareholding in the EIB post-Brexit would have to be approved by the UK and the EU’s 27 other member states. Should it withdraw from the bank, sources indicated it would have to come to a negotiated settlement with current shareholders, through what could be a tortuous process.

Similar questions hang over the UK’s future relationship with the European Fund for Strategic Investments, a vehicle launched in July 2015 as part of the EU’s “Juncker Plan”. The fund, effectively managed by the EIB, provides guarantees to loans offered to projects that are typically sub-investment grade.

A source estimated that the vehicle, initially endowed with €21 billion, now has about €100 billion in firepower available over the next five years, after another €40 billion allocation from member states was approved last year. About €30.2 billion of financing has so far been approved, which the EIB says has been used to leverage €163.9 billion worth of total investment.

No provision exists for non-EU member states to participate in the fund, meaning the UK, as things currently stand, will have to withdraw once it exits the bloc – or even before, if both parties agree on an earlier departure during Brexit negotiations.

Three scenarios therefore exist: one under which the UK manages to remain a member of both of institutions, after significant changes to existing rules; a second option that would see the UK retain a shareholding in the EIB without contributing to the fund, effectively depriving it from EU support for sub-investment grade projects; and a third course of events under which it would withdraw both.

Insiders say they cannot yet attach probabilities to the scenarios currently on the table.