A major contributor to the European Fund for Strategic Investments (EFSI) and the main beneficiary of the Juncker Plan, a post-Brexit United Kingdom will have to learn to live without EU investment. EURACTIV France reports.
The European Union will re-examine the future of its investment plan following the UK’s vote to leave the bloc last Thursday (23 June). Not only is the UK one of the biggest contributors to the Juncker Plan, with €6 billion invested in the programme, but it is also its biggest beneficiary.
According to the European Investment Bank (EIB) the UK’s access to the EFSI, the €21 billion fund behind the Juncker Plan, will have to be redefined as part of the Brexit negotiations.
“The impact of the United Kingdom’s exit on the activities of the European Investment Bank will be part of the overall negotiations when the time comes,” said a representative of the Commission.
Adopted in the wake of Jean-Claude Juncker’s nomination as the head of the Commission in 2015, this investment plan is designed to generate €315 billion of investment in projects linked to the environment, infrastructure, innovation and SMEs across Europe by 2018, using an investment fund of €21 billion.
Investment in Europe has stagnated in recent years, never recovering to its pre-2008 crisis levels.
But the Commission’s programme may be thwarted by the United Kingdom’s departure. The Juncker Plan’s success to date is in large part down to the country’s strong financial competences.
In a memo on the impact of Brexit, the EIB stressed that the United Kingdom had been the biggest beneficiary of the Juncker plan since its launch in 2015.
A study by rating agency Standard & Poor’s (S&P) even found that the United Kingdom benefitted almost twice as much from the investment plan as the other big members of the EU.
The United Kingdom has had three infrastructure projects validated for Juncker Plan funding, including a new hospital in Birmingham and an offshore wind farm in the North Sea.
These large-scale projects allowed the UK to mop up £692 million (€835 million) of EU investment.
After one year in action, 249 projects around the EU have been approved for a total of €13 billion. These projects should mobilise €100 billion of investment, or around one third of the total objective.
According to the EIB, the UK projects that have already been signed and approved will be maintained.
But Juncker Plan funding for further projects across the English Channel could rapidly dry up. “A significant share of the Juncker Plan’s financing comes from the European budget. So from now on, no new Juncker Plan projects will be approved,” said Dominique Riquet, a French liberal MEP (ALDE group).
After Brexit, it is not just the Juncker Plan, but the EIB’s whole investment policy that may be at risk.
“The European Investment Bank is an institution of the European Union,” the MEP said. “So if you are no longer a member of the EU, you cannot run the EIB.” The United Kingdom currently holds 16% of the EIB’s capital.
Risky long-term investments
While the UK may hold onto the investments it has already been promised, Brexit poses a considerable threat to the EIB’s many long-term investments in the country. The future of these investments “could prove risky”, the EIB said.
A view shared by S&P, which downgraded the United Kingdom’s credit rating in the wake of the referendum, raising the cost of borrowing.
If London negotiates the status of an EU associate country over the next two years, the country will still lose out on investment. “Finance of this type is not available to associate countries like Switzerland and Norway,” said Riquet.
Over recent years, the EIB has provided €43 billion of long-term investment to the UK, compared to a total of just €1 million for the European Free Trade Agreement (EFTA) countries (Switzerland, Liechtenstein, Norway and Iceland).
Another fear is that without the EIB, the United Kingdom will have no public investment bank. “Unlike the other European countries, the United Kingdom has no public investment structure that can take over from the EIB overnight,” the institution said.
On 25 November 2014, the Commission revealed the details of its €315 billion investment plan.
In a gesture of solidarity, the money from this plan will largely be used in the South of Europe, in the countries worst affected by the crisis.
The idea is to create a new European Fund for Strategic Investments (EFSI), with €5 billion coming from the European Investment Bank and an €8 billion guarantee from existing EU funds designed to secure a contribution of €16 billion in total from the institutions.
The €8 billion guarantee will come over a three-year period from the Connecting Europe Facility (€3.3 billion); Europe’s research programme Horizon 2020 (€2.7 billion) and so-called “budget margin”, or unused funds, worth €2 billion.
The resulting EFSI fund totalling €21 billion is expected to generate €240 billion for long-term investments and €75 billion for SMEs and mid-cap firms over the period 2015-2017.
The plan drew questions over the lack of new cash, with some members of the European Parliament calling it "recycling and re-labelling" of existing programmes.