The Interview | John Flint, UK Infrastructure Bank

Providing the financial footing for delivering net zero

By Claire Smith

The UK Infrastructure Bank (UKIB) has recently celebrated its second anniversary and is just starting to hit its stride in terms of building the team needed to provide the funding that will deliver its aims.

The remit the bank was given at its launch in June 2021 was clear. It is to partner with the private sector and local government to increase infrastructure investment which will help to tackle climate change and promote economic growth across the UK.

To date the bank has made 17 deals, lending £2bn of public money, leveraging £7bn of private capital along the way. It expects to lend £22bn over its first five to eight years.

UKIB chief executive John Flint says the number of deals made will soon start to ramp up but those signed so far “give a flavour” of what the bank will do in the longer term.

“We started at the simpler end and we’re now building up to agreeing more complex deals,” he says. But the first task, after launch, was to hire people to run the bank.

“Chris Grigg, who previously worked for Goldman Sachs, Barclays and British Land, was appointed as chair in June 2021 and he then brought me into the organisation as chief executive,” says Flint. Flint joined the UKIB in September 2021 after 30 years with HSBC, which he joined as a graduate trainee before working his way up to the role of chief executive. UKIB is a very different type of organisation to HSBC, but Flint clearly relishes the challenge of his current role and the opportunity to build something from scratch.

“There are lots of great infrastructure banks and funds but they are not publicly owned and they don’t just exist to solve problems“There is nothing else quite like us,” he explains. “There are lots of great infrastructure banks and funds but they are not publicly owned and they don’t exist just to solve problems.”

While the UK’s exit from the European Union meant that projects could no longer access funding from the European Investment Bank (EIB), the need for UKIB was much greater than overcoming the loss of the EIB funding route. That need was due to the scale of the net zero challenge, according to Flint.

“When you look at the net zero strategy in the UK and the scale of change required, then consider the scale of financing needed to fund that change, there was a very real nervousness about the market’s ability to finance that on its own,” he explains.

Appointing a leadership team and establishing the bank in its Leeds headquarters filled Flint’s time initially, which was a challenge.

“Setting up an organisation of this type, in the context of the public sector, and in Yorkshire was an unknown as the market for these types of professionals is in London,” says Flint.

Nonetheless, others were attracted to the UKIB to resolve the same challenges that brought Flint into his role and he is proud of the calibre of the recruits. Today the UKIB has just over 200 staff and Flint expects that to rise to 250 to 280 people by spring next year.

While it has taken time to build the team with the skills and capabilities to deliver on the bank’s aims, it completed its first deal in October 2021.

The deals made so far include £50M of financing for Portsmouth Water’s £339M Havant Thicket reservoir in Hampshire, which is the first new water supply reservoir to be developed in the UK for 30 years. The bank has also lent £50M to the Port of Tyne to support its expansion plans to provide a base for the growing number of green industries in the area, including offshore wind.

The UKIB is providing funding for the Port of Tyne’s expansion plans

Another project to have received UKIB funding is the Highlands Rewilding which obtained a £12M short-term bridging loan to enable the acquisition of the 1,300ha Tayvallich Estate in Argyll. Highlands Rewilding aims to return the land to temperate rain forest, which will sequester CO2 2 at higher levels than the grasslands that have resulted from centuries of sheep grazing.

These schemes highlight the types of projects for which the UKIB was set up to provide funding. They are projects that will be key to delivering net zero and managing the impacts of climate change, as well as generating regional investment that is key to levelling up.

Flint says the UKIB does not exist to replace conventional private finance. It exists to step in when normal financial institutions view the risk as too high, either because a project is a first of its kind or because the scale or pace of a project is new.

The UKIB has five priority sectors – clean energy, transport, digital, waste and water – which were defined by the Treasury to determine how it provides its funding. Those priorities appear broad but there are clear definitions of the types of deal the bank will consider under each of those headings.

As you might expect, clean energy covers renewable generation and distribution of electricity, as well as the hydrogen fuels and their supply chain and carbon capture usage and storage (CCUS). It also covers retrofitting buildings for energy efficiency.

Transport funding is focused on electric vehicle infrastructure, green rolling stock, port infrastructure – particularly where it supports green industries – and upgrading and building new mass transport infrastructure.

The digital focus is on the rollout of 5G and gigabit-capable broadband nationally.

For water, the bank aims to provide finance for projects that fall outside the water industry’s normal five-year funding cycle and nature-based solutions.

The waste focus is on scale and sophistication of recycling infrastructure and retrofitting energy from waste plants to include CCUS.

“Around those five priority areas, the bank will support assets, technology, networks or the supply chain needed,” explains Flint.

Flint adds that the bank is not there to provide lending for social infrastructure, such as schools and hospitals, roads or projects that have a focus on the use of fossil fuels.

Interest in securing funding from the UKIB has been high so far as Flint believes project leaders feel it implies a certain level of government support. However, he urges those looking to work with the bank to seek conventional capital first as UKIB only exists to give support when other banks will not lend. Flint also stresses that the UKIB is set up to be profit-making and it is not in the business of handing out grants.

He says the next decade is critical for the UK if it is to achieve its net zero aim and he firmly believes that the bank also has a critical role in helping it get there.