Posted by: Nick Duxbury08/03/2012
So Edinburgh has won ownership of the Green Investment Bank.
My initial reaction to this news when it broke on Twitter was irritation. In my head all I could already see were the quotes from council leaders about the ‘huge vote of confidence for Edinburgh’s future as a financial centre’, and then, simultaneously, a room full of pension fund managers in the City throwing their heads in their hands.
The reason is simple: the £3 billion GIB is too important to turn into a political prize to be won by other regional cities. Too many projects rely on its success. Social landlords should care because the green deal relies on finance from the GIB.
Specifically, the Green Deal Finance Company is heavily relying on a chunky loan from the GIB without which the green deal very well won’t work. For big news on this, keep your eyes peeled on our website or your free issue of Sustainable Housing magazine tomorrow.
If the GIB is to be a credible investment bank and not just a glorified fund, then it is essential that it is based in London, in the City – ‘the leading global financial centre’ (if Vince Cable is to be believed) – alongside all the other major lenders, investors, brokers and other viable financial institutions.
The idea of sending the GIB to Leeds, or Coventry or Bristol or any of the 31 applicant cities that weren’t London made no sense to me. Surely any other investment bank wouldn’t even consider basing itself outside of the City.
And since when was the GIB anything to do with building the economies of cities? It is about financing a green UK-wide economy. Anything that detracts from this goal – be it a nine hour train journey or simply a denting of its global credibility – is surely illustrative of how casual a commitment the government has made to the bank?
An hour later, back in the office, I read the full story.
What a relief. It turns out that, yes, the GIB will be headquartered in Edinburgh. Technically. But it will conduct transactions from London. The London office will host a transaction team and project financing team – i.e. the really important stuff surrounding actual loans. So we are left with the best of both worlds, then – or a pointless political compromise.
A written statement from the Department for Business, Innovation and Skills Parliamentary Secretary Baroness Wilcox seemed to concede that it would be little short of lunacy not to have a GIB presence in London.
‘To be effective in originating transactions and participating fully alongside other commercial investors, it is clear to me that the GIB’s major transaction team must be located, at least initially, in London, though capacity may be developed over time in Edinburgh,’ she said.
‘In coming to this decision, I have concluded that the challenge of recruiting teams of project financiers of the necessary skill and experience outside London would represent a significant risk to the successful operation of the GIB in its early stages.’
This was clear from the start. So why go through the whole charade of launching a competition to win the bank?
Doubtless local authority leaders and councillors in cities across the UK will tell me that their bid was excellent and that it represents yet another snubbing of their region in favour of London (again). But in my view, they are completely missing the point of the bank.
All that said, the location of the bank will only have so much of an impact whether it can become ‘a global leader’ as Vince Cable this morning claimed it would. It is important insofar as it sends out a message of intent – but beyond that, it is up to the government to ensure that it is resourced to make an impact.
As Friends of The Earth’s economics campaigner David Powell eloquently states: ‘Choosing the HQ for the Green Investment Bank has been like arguing about where to put the cherry on a half-baked cake. This is great news for Edinburgh, but George Osborne’s inadequate support means it will start life as a lame duck.’
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