Greater Manchester Combined Authority (GMCA) is racing to sign and access the final European Investment Bank (EIB) loan to UK local government before Brexit.
The EIB board of directors recently agreed a £100m loan towards the £350m project costs of extending the city’s tram between the Pomona island and the Trafford centre, with no other UK local authority loans in the pipeline.
With uncertainty hanging over the UK’s relationship with the EIB after Brexit, the authority says it needs to draw down the cash before the UK’s leaving date at the end of March next year.
Speaking to Room151, GMCA treasurer Richard Paver said: “The EIB board has agreed the loan and we are aiming to sign the deal by October.
“We can draw down the money in tranches and hope to take the first amount before the end of this year. However, given the timing of Brexit, we need to take all of the money before March. The EIB would not be comfortable about drawdown after Brexit.”
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Paver said that the loan would most likely be taken over the maximum 30-year period allowed under EIB rules.
He added that he expected the rate— which will be fixed when cash is drawn down — would beat the equivalent PWLB interest rate.
Paver said that the rest of the cash for the project will come from the authority’s cash flow in the short term, with longer term funding under review.
Loans will be repaid partly through Manchester’s “earnback” arrangements, agreed as part of its city deal with government, along with tram fare revenue.
The Manchester Metrolink extension project will see a new 5.5km line with six new stops and 10 additional trams.
A spokesman for the EIB said: “From a local government perspective the Manchester loan is realistically going to be the last one we sign before the UK leaves the European Union.”
In March, the UK’s draft withdrawal agreement with the European Union provided for it to cease to be a shareholder of the EIB, receiving repayment of its capital in stages up to 2030.
After Brexit, the agreement text says, projects located in the UK will not be eligible for loans from the EIB which are currently reserved for member states.
However, in July, Werner Hoyer, head of the European Investment Bank, said in an interview that he could still see the possibility of Britain remaining an active member of the infrastructure bank after Brexit.
In his 2017 Mansion House speech, chancellor Philip Hammond said: “In the long-term, it may be mutually beneficial to maintain a relationship between the UK and the EIB after we leave the EU. And we will explore the options together.”
The approval of the Manchester loan by the EIB board comes two months after the bank signed a deal with the West Yorkshire Combined Authority for a £100m loan towards a £250m transport project.
