By Vivienne Russell

29 Feb 2024

The Treasury-backed UKIB, launched in 2021, aims to advance both net-zero and levelling up ambitions. Here, some of its leaders talk about the challenge of doing something new and blending the best of the public and private sectors

Setting a new arm's-length body up from scratch is an “unusual privilege”, Kate McGavin reflects.

Along with her job share partner Helen Williams, McGavin is director of policy at the UK Infrastructure Bank, which launched in June 2021. Indeed, the pair enjoyed their secondment stint so much – they were the twelfth and thirteenth employees through the door during the bank’s formative days – they decided to stay for the long term, accepting permanent contracts this summer.

“We felt that we couldn’t leave,” Williams tells CSW. “We were having too much fun.”

The pair like to talk about the “privilege of the blank sheet of paper”. There is no template for how UKIB should carry out its mission of driving local growth and helping the United Kingdom reach net-zero carbon by 2050, so McGavin and Williams have forged their own path forward, harnessing the best of public and private sector skills and knowledge, and continuously learning on the job.  

“We don’t have to do things the same way that other organisations have done things,” says McGavin.

“We are here to solve problems that the private markets and public sector can’t solve by themselves. In order to do that, you have to be able to think imaginatively, you have to be able to work really collaboratively across the different skills that we’ve got in the bank.”

Collaboration, imagination, generosity, humility, commitment to learning – these are some of the phrases that pepper the conversation with CSW, which is also joined by the bank’s chief people officer Patricia Galloway.

UKIB’s remit, according to all three women, is a very special one. With £22bn to invest in green infrastructure projects via equity, loans and guarantees, it has a dual mission: both to advance progress towards net zero and to tackle the levelling up agenda, working alongside local government to stimulate local and regional economic growth. It’s no accident that UKIB’s headquarters are located in Leeds and its launch was attended by a range of local voices celebrating the choice to site a national institution in a northern city.

For McGavin, the appeal of working at UKIB can be distilled down to three things: its mission, its money and its influence.

Working across big ticket policy agendas like net zero and levelling up, having billions to invest on behalf of taxpayers (especially at a time of tightening public sector budgets) and the ability to influence both wider government and the markets is a highly unusual position to be in, she says.

“Lots of jobs out there might have one or two of those things, but it’s really rare to find all three.”

UKIB is a relatively small operation – once at full capacity the bank will only employ around 280 people – but it is determined to have a big impact. Led by former HSBC Group chief executive John Flint, the bank has moved quickly and to date has closed 20 deals, which have together invested around £1.9bn of the £22bn at its disposal. This in turn has unlocked around £9.7bn in private capital for a range of critical infrastructure projects. It has identified five core sectors which are priorities for investment: clean energy, transport, digital, water, and waste. Investments need to meet four tests (see box) and financing deals agreed so far support everything from the roll-out of electric vehicle charging points across the motorway network and the rewilding of the Scottish Highlands to a rapid transport scheme in the West Midlands. Details of its future pipeline are not made public, but UKIB says it expects to diversify further into areas including hydrogen, carbon capture, usage and storage, zero-emission buses and heat networks.

While the establishment of UKIB may recall the Green Investment Bank – the government bank established in 2012 before being sold off to Macquarie in 2017 – it is quite a different endeavour, McGavin says. The Green Investment Bank did not have UKIB’s remit around regional and local economic growth nor its broad reach.

“The infrastructure sectors that we cover gets us into all sorts of interesting parts of the economy, and I love that breadth. It makes for a really interesting portfolio.”

The principles that guide UKIB’s investments

1 Advancing UKIB’s twin objectives of tackling climate change and supporting regional and local economic growth

2 Supporting infrastructure assets, networks or new technology, with a particular focus on clean energy, transport, digital, water, and waste

3 Delivering a positive financial return

4 Crowding in significant private capital over time

Recruitment has been a major focus for the bank over the past 12 months. Galloway joined the bank in September 2022 after a 20-year private sector career running human resources for banks. She says the executive team’s focus since then has been on building up the permanent team.

“We were staffed with great teams of contractors but the heavy focus for me and for the rest of the ExCo [executive committee] for the last year has been that transition from a contracted workforce into our permanent employee base.

“We’ve been doing a significant amount of recruitment. But within that recruitment, our bar is high. We want exceptionally talented individuals to come into the bank because the mission we have is a tough one.”

The bank’s employee base is a mix of people from banking, consultancy and the wider civil service. It’s important to keep networks with the wider civil service open and regularly refreshed, Williams explains.

“We’ve got a set of great secondees who are from various government departments, and they come with fantastic connections back into policy teams in central government. And we always want to keep that dynamism going.”

The mix of public and private sector cultures in play at the bank is providing a rich learning environment and is clearly valued.

“It feels really blended,” says Galloway. While UKIB is a bank, she says, it’s one with public interest at its heart. “The people who join [from the private sector] have that ethos and then obviously our public sector colleagues live and breathe it.”

Williams stresses the strong sense of collaboration and camaraderie at the bank.

“For me, there’s been a really fantastic learning opportunity to understand how private financing particularly, but also on the local authority side, can help to amplify government policy,” says Williams.

“I can bring my specific experience in central government policymaking, but also layer on this new commercial and banking experience that one of my colleagues brings to bear, so I have been really enjoying that. Everyone’s got a piece of the jigsaw.”

McGavin agrees. “It’s good to have people who approach problems and challenges from different perspectives.”

UKIB has set out to be a “diverse by design” organisation. Galloway highlights the diverse leadership team at the bank but stresses the importance of diversity of thought alongside diversity of characteristics.

“We’ve got a big problem that we need to solve, but we need people who are going to look at it from different angles. So that’s also very much built into the recruitment when we’re looking at candidates.”

McGavin and Williams’ job share arrangement – the pair have been working together for seven years and the UKIB role is their third job – was greeted with some curiosity by their private sector colleagues who are less used to such arrangements, particularly at a senior level.

But the pair have been warmly welcomed and feedback has been positive. “I must say Kate and Helen role model how to do a job share brilliantly,” Galloway adds.

They’ve even married up another couple of colleagues who have gone off elsewhere on promotion as a job share partnership.

“We’ve added to the job share universe and I’m very pleased about that,” McGavin smiles.

With the bank birthed during the pandemic, the blank sheet of paper came in handy again when crafting a working culture. Where private sector banks might still be wrestling with strategies to coax employees back to the office, Galloway says the UKIB team are having fun working together. The bank operates a hybrid model, expecting employees to attend the office for three days a week. The approach has been a great success.

“We have great energy. We get so much done,” Galloway says.

“We’re building a bank, we need to be around each other and everyone’s been very receptive to it.”

The UKIB in action: Cornish lithium

In August 2023 UKIB closed its first equity deal, taking a £24m stake in Cornish Lithium, focused on lithium mining, a metal crucial to scaling up the manufacture of electric vehicle batteries and the development of battery energy storage.

UKIB’s equity attracted matched funding from US-based private equity fund the Energy and Minerals Group and helped attract £5.6m in additional funding from Cornish Lithium’s existing shareholder TechMet.

While UK-based lithium extraction will support the development of vital green technologies, UKIB investment will also boost the local economy in Cornwall and is expected to allow Cornish Lithium to grow its workforce from 70 to over 300.

Announcing the deal, UKIB CEO John Flint said it “perfectly encapsulates a key part of our mission – to drive forward new and emerging markets that the UK will rely on to meet its net-zero goals, and which will deliver an enduring and positive impact on local economies”.

Relationships with the Treasury – UKIB’s sole shareholder – are described as “really good”. “They are a great department to be anchored to,” says McGavin. But she stresses there are important relationships across Whitehall more broadly, and the team talks regularly to the Department for Energy Security and Net Zero, the Department for Environment, Food and Rural Affairs and the Department for Transport among others, and has come to be viewed as a supportive, critical friend.

“We are definitely bringing something to policymaking,” she says. “Whilst we don’t make policy ourselves, we are here to help Whitehall accelerate and develop policy in the best way they can.”  

Relationships with local government are also key. UKIB has a small advisory team working with councils to help them craft financing solutions to the problems they face such as heat networks, property retrofits and electric vehicle charging networks. The bank can also offer finance at preferential rates, lower than what is available from the Public Sector Loans Board.

In addition, the bank’s UK footprint is important and, while much of policy is reserved to Westminster and Whitehall, UKIB is conscious that the devolved administrations have an important role to play in its agenda, so it is in the process of recruiting a director for each of the devolved nations.

With 20 deals done in the first two years of operation, UKIB has made rapid progress, but McGavin stresses that it is early days, and the bank is still continuing to build its balance sheet.

As UKIB commits more of its capital and its pipeline starts to fill up, the bank will have to start making some decisions around what to prioritise. Impact metrics will become more important to guide the bank towards those projects most likely to generate a good return for the taxpayer while advancing the bank’s strategic aims.

McGavin talks about the “triple bottom line”. UKIB needs to generate a return on its equity, and to deploy into priority sectors against its twin objectives of advancing net zero and supporting local and regional economic growth. Thirdly, “we have to be additional,” McGavin explains. “We mustn’t replace private capital and we have to have an impact beyond the economic return that we make.”

Impact is extremely important to the bank and a quick look at the UKIB website shows that the bank is very keen to be transparent to demonstrate the difference it is making. In broad terms, impact might be tracked by the amount of carbon abated, jobs created or by improved connectivity, all of which link back to the ambitions set out in the government’s net-zero strategy and the levelling up white paper.

There is also value in problem solving, McGavin adds. The bank has some advantages over traditional private lenders and is both able to tolerate some slightly elevated risks and to act as a bridge between the public and private sectors.

“We’re out there to look to do new things… things that haven’t been done before. And that in and of itself has intrinsic value for the public and the private sector.”

Williams points to the bank’s investment in a natural capital project on rewilding part of the Scottish Highlands as a good example of it pushing nascent markets forward and supporting innovative practice.

UKIB’s first deal for Scotland committed £12m to a nature restoration project on the 1,300 hectare Tayvallich estate in Argyll, which – thanks to the funding – has been acquired by Highland Rewilding Ltd. The finance will support the restoration of temperate rainforest on the estate, which will be able to absorb carbon dioxide from the atmosphere. It is also expected to lead to job creation in the area and support eco-tourism, advancing UKIB’s regional economic growth objective.

“It’s definitely one of the deals we are particularly proud of,” says Williams. “The investment we have made has all been about moving that market forward.”

UKIB doesn’t just sit back and “admire problems”, McGavin adds by way of conclusion.

“We roll up our sleeves and we look at how we can deploy our capital. We won’t always get that right. But the challenges that we’ve got are really urgent and they’re really tricky.

“We are absolutely in the market for having those conversations and trying to get rapidly to a point where we can think about whether there’s a solution that our capital can unlock.” 

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