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Chancellor of the Exchequer George Osborne outlined plans to encourage as much as 51 billion pounds ($80 billion) of spending on U.K. infrastructure and exports in the latest effort pull the economy out of recession.
The Treasury will operate a 40 billion-pound loan-guarantee program to underwrite a share of projects that face financing difficulties and are ready to begin in the next 12 months. It will also provide 6 billion pounds in loans to 30 public-private partnership projects and a further 5 billion pounds of export guarantees for infrastructure and manufacturing companies.
“The credibility the government has earned through tackling the deficit is already helping,” Osborne said at the announcement of the program in London today, according to remarks released by his office. The guarantees “will use that hard-won fiscal credibility to provide public guarantees of 50 billion pounds of private investment in infrastructure and exports.”
The announcement follows other initiatives aimed at lifting the economy out of its second recession since 2009. Prime Minister David Cameron pledged this week to invest more than 9 billion pounds in the U.K. rail network, while the Treasury and Bank of England last week gave details of a plan to boost credit to companies and households by at least 80 billion pounds.
Other efforts focus on involving pension funds in financing infrastructure. The opposition Labour Party says more is needed to boost demand in the short term and advocates tax cuts.
The Treasury said projects identified in the 2011 National Infrastructure Plan that face funding difficulties can apply for support from today. The plans need to be credible “with equity finance committed and project sponsors willing to accept appropriate restructuring of the project to limit any risk to the taxpayer.”
The 6 billion pounds of loans to private-public partnerships will aim to spur projects in transport, health, housing and education, the Treasury said. Export loans aim to support aerospace, oil and gas extraction equipment, transport and telecommunications infrastructure services, hospital construction and management services and sports infrastructure.
Business leaders welcomed the announcement, while criticizing the government for failing to take action sooner.
“Business expects speedy action, rather than yet more unfulfilled promises,” the director of policy at the British Chambers of Commerce, Adam Marshall, said in a statement. “Only visible results on the ground will make this announcement, and the government’s National Infrastructure Plan, worth the paper they’re written on.”
Today’s announcement “will not be a game-changer in driving forward infrastructure investment,” Michael Conroy Harris, a construction specialist at international law firm Eversheds LLP in London, said in an e-mailed statement. “The criteria for the guarantees will need close consideration and the key issue will be finding projects which are otherwise ready and funded to proceed given the economic environment and general lack of available private debt funding.”
Budget cuts, a squeeze on households as inflation outpaces wages and turmoil in the euro region -- the biggest market for British goods -- are weighing on an economy that has recovered barely half of the output lost in the recession of 2008-2009.
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