Chancellor pledges more support for infrastructure projects in 'Mansion House' speech

These initiatives will include extending the UK Guarantees scheme to offer construction guarantees for the first time, and the provision of 'first loss' guarantees to reduce the financial risk that complex projects face. Limits on the amount that the state-owned British Business Bank can invest in venture capital funds will also be increased, from 33% to 50%, the chancellor said.

Chancellor Philip Hammond also used his first 'Mansion House' speech to reiterate the government's priorities in its negotiations with the European Commission on leaving the EU. As part of the negotiations, the two bodies would "explore the options" that would allow the UK to maintain a relationship with the European Investment Bank (EIB), he said.

Hammond said that the EIB and the European Investment Fund (EIF) had been "important source[s] of funding for infrastructure investment and for growth businesses".

"I want that access to EIB funding to continue while we are members of the EU on equal terms, so I am engaged with EIB and will provide the assurances it needs to sustain the flow of EIB and EIF funding to UK businesses and projects," he said.

"In the long-term, it may be mutually beneficial to maintain a relationship between the UK and the EIB after we leave the EU. And we will explore the options together. But we cannot take chances. So we will be prepared, in case we do not maintain that relationship," he said.

Project finance expert Michael Watson of Pinsent Masons, the law firm behind Out-Law.com, welcomed that news that the government is "so focussed on ensuring that the level of support for infrastructure and energy investment will be maintained or enhanced during the period of the Brexit negotiations".

"EIB and other multilateral lenders and investors play a critical role in 'crowding in' investment to projects that in turn stimulate economic growth and increase productivity," he said.

"In particular, it is to be welcomed that the focus will be on construction guarantees and first loss debt. Both are areas where an increased focus should accelerate the throughput of projects to a stage that they are fully investable and attractive to a wider range of lenders and investors," he said.

The UK is currently one of the main shareholders in the EIB, with a 16.11% shareholding. In return, the UK relies heavily on funding from the EIB, which invested over €7 billion in UK projects last year. Under EIB rules, only EU member states may be shareholders in the bank; although the EIB has said previously that any change to the existing shareholder structure is "a decision for the member states".

Elsewhere in his speech, the chancellor emphasised the importance of free trade in services, particularly financial services, as part of a future free trade agreement with the EU. The UK's economy is 80% service-based, and EU capital markets activity is heavily dependent on UK trading and lending, he said.

Hammond said that it would be in the interests of both the UK and the EU to develop "evidence-based, symmetrical and transparent" cross-border regulatory arrangements. However, the UK would have to be "flexible and pragmatic" when responding to "genuine and reasonable concerns among our EU colleagues about oversight of financial markets that will then be outside EU jurisdiction, but which provide a vast proportion of economically vital financial services to EU firms and citizens".

"Avoiding fragmentation of financial services is a huge prize for the economies of Europe," he said.

"The discussion shows just how complex and multi-faceted the negotiations over Brexit are going to be, and therefore how important it is for businesses to try and understand the implications of Brexit for them, so that they can engage appropriately with the government to ensure that the latter is made aware of the issues and potential solutions that business has," said EU law expert Guy Lougher of Pinsent Masons.