It is not every day that the former boss of HSBC is found trudging through the mud of a Cornish mining site. But this was a special occasion. On an overcast day in early August, John Flint, now head of the UK Infrastructure Bank (UKIB), descended on Trelavour Downs in black wellies and a hi-vis jacket, alongside the Treasury minister Andrew Griffith, to mark the government-owned bank’s £24m investment in Cornish Lithium: the company hoping to jump-start a local lithium supply chain for electric vehicles and the wider renewable energy sector. The project fulfils UKIB’s mandate, by supporting regional development and the UK’s net zero climate ambitions. It also marks the lender’s first ever direct equity investment and increased the bank’s total spending to £1.9bn. However, that is far short of the £22bn worth of taxpayer funds currently at its disposal, raising questions over whether – after two years and £45m of taxpayer cash – UKIB is finally in a position to play a key role in the UK’s infrastructure and net zero ambitions. UKIB was unveiled in November 2020 by the then chancellor, Rishi Sunak, alongside a £100bn infrastructure plan meant to help revive the country’s fortunes after the Covid crisis. The bank, based in Leeds, would issue loans, guarantees and direct equity investments in five priority areas – clean energy, transport, digital, water and waste – with an annual steer from its single owner: the UK Treasury. Planning started months earlier, after the UK formally lost access to the European Infrastructure Bank (EIB), which had spent about £5bn a year in the UK before Brexit. While broader in scope, UKIB was also expected to fill the shoes of the Green Investment Bank, which was privatised in 2017. Labour criticised the plan, noting that UKIB was much smaller than rival development banks, including the KfW in Germany, which in 2022 had €607bn (£521bn) of outstanding loans on its books and equity stakes worth €36.6bn. Labour also noted that the Treasury’s independent forecaster, the Office for Budget Responsibility, did not expect UKIB’s work to increase economic growth. But the Treasury pressed ahead, launching the bank in June 2021 in an unfinished state. According to a National Audit Office assessment, the government in effect skipped the detailed planning phase, starting operations with a skeleton crew of six staff, without the objectives or performance metrics that would usually be in place. And although the Treasury instituted investment limits to avoid putting too much taxpayer cash at risk, UKIB was still without key personnel, including a chief executive. In September 2021, it landed on HSBC’s former boss John Flint. He is well versed in sprawling bureaucracies and private sector finance after 30 years at the lender, but City investors were not envious of the task he faced. “John Flint readily refers to ‘building the aeroplane in flight’, and that’s exactly what they were doing,” said Darryl Murphy, Aviva Investors’ head of infrastructure, highlighting the political pressure Flint was under. “You’re damned if you do and damned if you don’t.” Flint started hiring bankers, policy analysts and strategists to identify eligible projects that could secure returns of at least 2.5% for the taxpayer. His team took their time, controversially spending the bulk of two years issuing loans and investing in equity funds, rather than backing individual projects. That strategy attracted strong criticism from the public accounts committee. “It’s really not clear what the UKIB is doing that the market wasn’t already or would be with better functioning tax incentives,” the committee’s chair, Meg Hillier, said in January. But Flint said UKIB staff were careful not to rush into direct investments. “One of the reasons we were sluggish [was] we didn’t have the skills and the team to do it … and until we got them, I couldn’t allow us to do it.” Furthermore, the bank needed to avoid projects that could readily attract private funders without UKIB’s help. “The government is borrowing from the markets to give to us to lend. So if we’re doing things that are not needed, we’re inflating the national debt.” Despite moving cautiously, UKIB’s first investment – a £107m loan to the Tees Valley combined authority (TVCA) to develop the South Bank Quay – has stumbled on controversy, given that the local authority, led by the Conservative mayor, Ben Houchen, is now under investigation for corruption. UKIB said it was content with the project’s progress after a recent site visit, and that “any inquiry into the wider Teesworks site is a matter for TVCA and not something we would comment on”. Most of UKIB’s investments over the next year focused on energy infrastructure funds and fibre broadband projects. But as the skeleton team grew to 220 staff, including bankers with City credentials from Lloyds, Barclays, Aviva and the EIB, costs unsurprisingly ballooned. The Treasury spent £12m on admin costs for UKIB’s first year of operations, which tripled to £36m in the 2022-23 financial year. Aviva’s Murphy said it was “astounding, in terms of scale. I don’t think their cost-to-income ratio today would stack up in the private sector. But that’s the benefit of having government support.” Those admin costs cover staff pay, including for Flint, who was put on a pay packet worth about £490,000 a year. All of UKIB’s staff are also eligible for bonuses worth up to three months’ salary. Flint made about £65,000 in bonus payments in 2021-2022 – and that figure would have doubled if he hadn’t arrived part-way through the year. Flint defended the public bank’s bonus policy, saying he needed to attract experienced candidates, including from notoriously high-paying City firms. “In the context of the public sector, [the pay] is good. In the context of the private sector, it isn’t,” Flint said. “If we could reduce our salary bill by 10%, that saves the public sector some money, but if we deploy £22bn really badly, that’s a whole [other] order of magnitude of taxpayer impact.” The Treasury is publicly confident about UKIB’s progress to date, particularly in light of the recent Cornish Lithium investment. And with his team now in place, Flint is confident UKIB’s investments this year will be “roughly double” the approximately £1.1bn committed through 2021-2022, and will then accelerate. “The financing needs that come directly off the government’s net zero strategy are just going to start increasing significantly year after year,” he said. How successful UKIB will be at drawing in private investors remains to be seen. Darius Craton, head of the private capital advisory arm at the US investment bank Raymond James, said a consistent and steady stream of investments over the coming years would help. “Returns will still be at the forefront of investor’s minds as they assess potentially partnering with the UKIB,” he added. But there could be a potential shake-up after the next general election, with uncertainty over how a Labour government would seek to deploy UKIB’s resources. For now, Flint is comfortable with UKIB’s trajectory. “I don’t have the luxury in this role of an organisation with lots and lots of resources. We’ve had to build it,” Flint said. “So anyone who thinks we’re not going quickly enough, should give me a call. But otherwise, I can assure you we’re in exactly the right space.”