Newly appointed U.K. Chancellor of the Exchequer Rachel Reeves Tuesday announced plans to create a national wealth fund to make infrastructure- and energy-transition-related investments. The fund could be active in less than a week.
“We need to go further and faster if we are to fix the foundations of our economy to rebuild Britain and make every part of our country better off,” Reeves said in a statement. “That is why in less than a week we are establishing a new National Wealth Fund and bringing together the key institutions that will help unlock investment in new and growing industries.”
The U.K. Infrastructure Bank will allocate 7.3 billion pounds ($9.37 billion), which would be available for investments immediately, to the national wealth fund. The U.K. Infrastructure Bank, as well as the British Business Bank, will manage the assets of the fund in the near term.
The plans for the National Wealth Fund were part of the now ruling Labour Party’s platform, which the party began drafting in March. Labour won a significant victory in the U.K. general election on July 4, resulting in party leader Keir Starmer taking over as prime minister and installing a Labour-based cabinet.
The Green Finance Institute, a task force that will advise the fund, has identified five sectors that would benefit from investments from the fund, including green steel, green hydrogen, industrial decarbonization, ports and gigafactories for the production of electric vehicles and batteries.
While the preliminary funding will be available, the GFI estimates that the supplemental private and public investment needed by 2030 could range from 35.9 to 56.9 billion pounds ($46 billion to $73 billion). Likewise, the Climate Change Committee, which advises the U.K. government on emissions targets, has called for a sustained investment of 50 billion pounds per year for energy transition investments between 2030 and 2050.“Our mission to make Britain a clean energy superpower is about investing in Britain,” said U.K Energy Secretary Ed Miliband in a statement. “Our National Wealth Fund will help create thousands of jobs in the clean energy industries of the future to boost our energy independence and tackle climate change.”
To meet these investment goals, the U.K. government will need to “deploy the right combination of policy, regulation, tax, and subsidy, as well as catalytic capital to crowd in sufficient private capital. Policy will be a key enabler,” the GFI noted in a report. In the long term, the fund expects the ratio of private to public capital to be 3:1.
In a separate report, the GFI recommended that private capital be invested on a deal-by-deal level, with private investors investing in individual projects, rather than investing at the fund level, to accelerate activity in the immediate term.
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Tags: energy transition, GFI, Green Finance Institute, National Wealth Fund, Net Zero, NWF, Rachel Reeves, United Kingdom