Werner Hoyer, president of European Investment Bank, has told finance ministers that the bank is facing tough times with the withdrawal of the UK and the loss of cash looming over the institution. However, last month was a period of big funds and an intriguing number of deals that involved both corporations and public institutions.
Russia’s nanotech-focused commercialisation firm Rusnano and conglomerate Sistema, for example, launched a $100m vehicle, while China state-owned Citic Group’s unit Citic Private Equity led a $760m funding round for Best Logistics that also featured logistics firm Cainiao Network and conglomerate Fosun.
News also came from England’s northeast that NEL Fund Managers, a firm tasked with managing the EU-backed Finance for Business North East Growth Fund, has entered a long-term partnership with the Prince’s Trust, a charity helping young people aged 13 to 30 find jobs and access education and training.
NEL will offer mentoring, help with fundraising efforts, and work experience. The partnership, according to the firm’s chief executive, Yvonne Gale, will help boost opportunities. She said: “Encouraging entrepreneurialism is vitally important for the future health of the northeast economy, and we see this long-term partnership with the Prince’s Trust as a way for us to play a direct role in doing just that.”
The partnership may become more important if warnings uttered by Werner Hoyer, president of the European Investment Bank (EIB), are to be believed. Hoyer said: “We will have a few years of uncertainty ahead of us during which it will not be clear what will happen to Great Britain and its relation with the European Union. And depending on this is, of course, the question of what the relation between Britain and the European Investment Bank will be.”
The EIB has provided half the £125m ($165m) that makes up the Finance for Business North East program, a suite of seven initiatives of which the NEL-managed fund forms part. The other half came from the EU-owned European Regional Development Fund and the UK government.
Although the bank does not invest only in EU member states – it has, most recently, committed to a €500m ($560m) small and medium-sized enterprise financing instrument to be set up with the government of Egypt – it appears unlikely the it would seek to ink new agreements with British firms, even if it has said it will honour current commitments.
It might not be able to sign significant new agreements either – the bank, in theory, has €243bn in capital, but to date it has collected less than 10% of that, €21bn. The remainder is set to be paid in as required by investments. Hoyer said: “The United Kingdom is a big and important shareholder of the European Investment Bank and an important member state of the European Union. This is why it will be a difficult process.”
Indeed, the UK’s contributions make up €3.4bn of the bank’s currently available capital – approximately 16.2%. The devil is in the detail here – Brexit would mean the UK government must not only leave the bank and will be barred from further contributions, but it will also need to withdraw the money it has already put in.
The process of withdrawal may be gradual, to ease the significant impact it would have on the bank, but since nobody knows, nearly three months after the vote, what Brexit actually means – notwithstanding UK prime minister Theresa May’s hollow mantra that “Brexit means Brexit” – Hoyer and the EU’s finance ministers can only speculate at this point on which way the withdrawal will go.
And while NEL’s firing power is secure for now, what will happen after a withdrawal is anyone’s guess. In any case, England’s northeast could certainly use more attention and a more differentiated approach, after communities secretary Sajid Javid pulled the plug on the devolution initiative because the region’s councils were split on the proposed deal.
That split was due precisely because May has not been willing to guarantee the UK government will continue to boost the region’s economy the way the EU has been doing. Ironically, of course, much of England’s north voted itself into that corner.