When UK local authorities seek long-term borrowing to fund their capital expenditure plans, they often turn to central government via the PWLB (‘Public Works Loan Board’) lending facility. In certain cases, they may also partner with institutional investors or issue bonds in the capital markets when these offer better value. Another option which has been building momentum over the past few years is the UK Infrastructure Bank (UKIB) – which has just become the National Wealth Fund (NWF).
The new name was announced by the Chancellor on 14 October 2024 and signals an expansion of the organisation’s scope. The NWF will operate with a broader remit, increased capital, and a higher risk appetite, aligning with the government’s industrial strategy. Although details are yet to be fully disclosed, the NWF confirmed continuation of its work with local authorities, providing long-term financing and advisory services for qualifying infrastructure projects. At this stage, we anticipate that the lending terms will remain largely unchanged, though this could evolve as the NWF’s role becomes clearer ahead of the next financial year.
Originally launched in 2021, UKIB was established as a government-backed but operationally independent entity, with £22bn allocated for infrastructure projects to combat climate change and stimulate regional economic growth across the UK. Its mandate encompassed both private sector investments and local authority lending, with strategic plans published in 2022 and updated in 2023. A key part of its offer was £4bn earmarked specifically for lending to local authorities, across five priority infrastructure areas:
It has been particularly keen to work with local authorities on decarbonisation initiatives, such as building retrofits, heat networks, green transport, and multi-faceted infrastructure projects. Loans can be issued with terms of up to 50 years, priced competitively at gilt rates plus 40 basis points (bps), making them 40 bps cheaper than the PWLB Certainty Rate. The minimum loan size is £5 million, but authorities can bundle smaller projects together to meet this threshold.
The NWF’s lending structure offers greater flexibility than the PWLB, allowing authorities to stagger drawdowns over time and align repayments with a project’s cashflow. This makes it an attractive option for those with eligible projects, particularly for authorities seeking tailored financing solutions. However, it does require more preparatory work compared to PWLB borrowing. Local authorities need to engage with the NWF’s team to discuss project details, with an estimated turnaround time of six to eight weeks. In addition to lending, the NWF also offers infrastructure-specific advisory services to local authorities, without any obligation to borrow
A recent example of local authority lending under UKIB is West Suffolk Council, which secured a £17 million loan to support its net zero programme. The funds, drawn over three years, are being used to electrify the council’s vehicle fleet, decarbonise buildings, invest in rooftop solar, develop renewable energy projects, and upgrade streetlights to LED. While these projects didn’t individually meet the £5 million minimum loan size, they were bundled together into a portfolio, creating a viable financing proposition. This flexible approach could serve as a blueprint for other councils, particularly smaller authorities with several low-cost, net zero-aligned projects that, when aggregated, present a strong case for funding.
At Arlingclose, we specialise in providing borrowing and capital financing advice to local authorities, and we have been closely following the development of the National Wealth Fund since its inception as UKIB. If you would like to explore how the NWF’s offering could support your projects, please get in touch with us at treasury@arlingclose.com for more information on our advisory services.
Related Insights
Revisiting Interest Rate Swaps