Post-Brexit Britain and the European Investment Bank (EIB)

    Post-Brexit Britain and the European Investment Bank (EIB) | Global Britain
    What would a relationship between a post-Brexit Britain and the European Investment Bank look like?

    What will a future relationship between post-Brexit Britain and the European Investment Bank (EIB) look like? The EIB is a multilateral institution based in Luxembourg and is home to the investments of the 28 member states of the European Union. The EIB aims to promote integration and cohesion within Europe, contributing investments and finance solutions in favour of EU policy objectives. While the bank is a large investor worldwide, the majority of its activity—over 90 percent—takes place within the Union. So what would happen to Britain’s membership and influence within the EIB once it officially leaves the bloc?

    Membership with the major investment body is exclusively limited to member states of the EU. Britain is one of the four main shareholders in the EIB and according to the Financial Times, it is a net contributor of capital into the bank. The UK currently provides the bank with a large 16 percent chunk of capital invested, whilst the institution’s return of assets into Britain sits at just eight percent. The total contributions into the bank from all member states amounts to €21.7 billion with accumulated profits of a further €41.6 billion—reaching a total of €63.3 billion at time of reporting. Britain’s total share, according to the EIB’s 2015 financial statements, is valued at €10.2 billion.

    Will post-Brexit Britain get its money back?

    The barrister Martin Howe analysed the potential financial liabilities that could follow once the UK leaves the Union, finding that there is strong argument for the EIB to buy out a portion of the UK’s invested capital. However, Mr. Howe also believes that this is an unlikely route. ‘While it is clear that the UK owns this capital invested in the EIB,’ he wrote, ‘it does not mean the UK is entitled either legally or as a matter of practice to a cash payment, so stripping the EIB of a big chunk of its working capital.’

    Further, the single refund of capital from the EIB would be significantly smaller than if the UK was to remain a member and continue to receive the billions of pounds in yearly funding it currently enjoys.

    Dissolving membership with the European Investment Bank

    There are currently no guidelines on how a membership with the EIB may be dissolved should a member state decide to leave the EU. The EIB may look to protect the UK’s large capital contributions for the best interests of both the bank and the investments offered to projects across the Union, as well.

    To avoid such a brisk and financially damaging end to the membership, a post-Brexit Britain would have to ask for its capital to be released back into the country over time, giving the institution the time it needs to procure fresh core capital to replace it. Another option would be for the UK to remain a member of the EIB under a new special agreement that allows it to continue to invest into the bank and into projects across Europe—a mutually beneficial avenue.

    ‘Their [EIB] infrastructure investments are predicated on our [Britain’s] contribution,’ a source at Whitehall has said, ‘that’s one of the things they [EIB] are worried about.’ The UK’s potential withdrawal from the EIB gives Theresa May’s government leverage in the negotiations to drive a hard bargain with the institution. This could give the UK the upper-hand for a favourable agreement in terms of its relationship with the bank.

    The chief Brexit negotiator acting on behalf of the European Union, Michael Barnier, will be at the forefront of such topics as the new relationship with post-Brexit Britain and the European Investment Bank develops. Global-Britain will bring updates to the conversation as negotiations continue.