UK banks position for regional infrastructure financing under Burnham devolution plans

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UK banks eye regional infrastructure

Highlights

Lloyds Banking Group and NatWest held talks with Burnham’s advisers about supporting regional infrastructure projects ahead of his appointment as prime minister.
NatWest financed £160 million for Leeds Bradford Airport and participated with Lloyds in a £364 million refinancing for Newcastle Airport, while Lloyds committed up to £7 billion of new regional financing in 2024.
Banks anticipate increased roles in regional lending as public sector borrowing costs stay high and view support for devolution as a way to potentially mitigate future sector taxation.

Banks court devolution-linked lending opportunities

As first reported by the Financial Times, Lloyds Banking Group and NatWest have discussed devolution plans with Burnham’s policy advisers before his appointment as prime minister on Monday, according to people familiar with the matter. The lenders have stressed their broad footprint across the UK and their large business customer bases as assets that could help support regional infrastructure projects.

Burnham, the MP for Makerfield and former mayor of Greater Manchester, becomes Labour leader on Friday and promises sweeping new powers for UK regions. He also pledges to open a "Number 10 North" hub when he replaces Sir Keir Starmer as prime minister, part of a wider effort to narrow economic gaps between provincial cities and London.

Senior bankers say the sector is broadly supportive of greater devolution because it could accelerate the rollout of projects that banks can underwrite. They add that agreements may be reached faster at local level, where mayors hold greater influence over industrial strategy, land use and planning decisions.

Bankers close to the talks also warn that local government planning capacity needs to improve if projects are to move quickly. Some lenders also hope that demonstrating support for Burnham’s agenda may reduce the risk of heavier taxation on the sector under the new government.

Regional lending track record and sector impact

NatWest has provided 160 million pounds in financing for Leeds Bradford Airport over the past year and is part of a banking syndicate, including Lloyds, behind a 364 million pound refinancing for Newcastle Airport. In Manchester, NatWest is also the lead financier of bus infrastructure that Burnham championed during his time as mayor.

Lloyds says it has provided 22 billion pounds of financing to the social housing sector since 2018, supporting housebuilding across the regions. This year, it makes 1 billion pounds of new financing available in the North East, 2.5 billion pounds in Yorkshire and the Humber, and 3.5 billion pounds in the North West.

Banks expect to play an important role in regional investment as borrowing costs for the public sector, especially local authorities, remain elevated. Rory Connor, a partner at Addleshaw Goddard, says lenders are already showing appetite to structure funding around new devolved powers through direct lending, blended finance with public bodies and broader partnerships with pension funds and institutional investors.

The shift also fits a longer-term change in the sector since the financial crisis, when British banks retrenched and became more domestically focused. NatWest chief executive Paul Thwaite, who recently announced 20 billion pounds of lending in northern England to support regional growth, says decisions affecting local economies are often better made closer to the communities and businesses they serve.

Our earlier coverage of UK lenders positioning for Andy Burnham’s devolution agenda explained how banks such as Lloyds and NatWest were seeking a bigger role in regional project finance as he prepared to take office. We noted that while greater local control could speed up infrastructure decisions and expand private financing opportunities, lenders also warned that local planning capacity and concerns about potential sector tax hikes could shape how quickly deals move.

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