How might a National Investment Bank serve the real UK economy? Stephany Griffith-Jones and Natalya Naqvi explain.
An election pledge by the Labour Party to create a National Investment Bank (NIB) is among the more potentially valuable of its proposals. It would help meet much-needed funding for investment in: infrastructure, innovative small and medium enterprises and poor regions, which would be served by Regional Investment Banks. But perhaps more importantly a NIB would be a key instrument for helping implement an industrial policy and contributing sufficient financial resources for it.
A NIB would increase lending and investing in sectors key for the UK’s transformation to an ecologically-sustainable economy while giving a lift to productivity, and contributing to the growth of wages.
The need for an NIB function has cross-party recognition, but to varying degrees of commitment. Where Labour has proposed a £25 billion injection into a NIB, the Liberal Democrats, have pledged £5 billion for a new investment bank. While the Conservatives have a manifesto promise to grow the British Business Bank, they have not clarified by how much. And it has, so far, remained too small to have a meaningful impact. Furthermore, the UK Green Investment Bank, established in 2012, was swiftly privatised by the Conservative government and sold to the Australian bank and asset manager, Macquarie Group.
National development banks like the proposed UK NIB have been an important feature of financial sectors of most developed and emerging economies, especially the most successful and dynamic ones, like Germany, Japan, China, India and South Korea. The UK is an exception in not having such a public development bank, despite its evident need.