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Sunak’s ‘levelling up’ bank loans £550m to firms with tax haven links

Exclusive: UKIB was meant to help tackle equality but has pledged nearly all its cash to firms with offshore owners

Lucas Amin
29 July 2022, 1.54pm

Former chancellor Rishi Sunak in Stoke-on-Trent during a tour of the UK to promote the Levelling Up Fund (which is distinct from the UK Investment Bank)


Matthew Bridger/Alamy Live News

Rishi Sunak’s UK Infrastructure Bank (UKIB), set up by the former chancellor to tackle climate change and promote ‘levelling up’, has earmarked £550m for firms linked to tax havens, a repressive regime and a Tory donor, openDemocracy can reveal.

The figure of £550m is the lion’s share of the £817m it has so far allocated. A leading northern think tank said in response that tax havens were incompatible with levelling up, and that the bank must cut them out of investments.

UKIB announced plans in December last year to invest up to £250m in the solar energy fund NextPower UK ESG, managed by a firm called NextEnergy Capital Ltd that in turn is owned by a Luxembourg parent company: NextEnergy Capital SARL. There are legitimate reasons for a British company to be owned in Luxembourg, but the country is commonly used by corporations to underpay various taxes. An EU parliamentary committee on financial crime and tax avoidance has found that Luxembourg displays the “traits of a tax haven” and “facilitates aggressive tax planning”.

There are also questions about where the new solar fund backed by UKIB will itself be incorporated. NextEnergy Capital’s largest project, the similarly-named NextEnergy Solar Fund, is incorporated in Guernsey and is exempt from paying taxes on income, profit or capital gains, despite its many links to the UK.

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These links include 99 British solar power plants owned and operated by the NextEnergy Solar Fund and its listing on the London Stock Exchange. The fund openly admits that “the majority” of its revenue is “derived from government subsidies”, though did not answer openDemocracy’s questions about what proportion of these came from the UK.

openDemocracy asked UKIB where the new solar fund would be incorporated and where its owners would pay tax, but the bank did not respond. UKIB also failed to say whether it evaluates companies’ Environmental, Social or Governance (ESG) performance before issuing loans and investments.

The northern English think tank IPPR North has been critical of ‘levelling up’ rhetoric that has delivered little for deprived communities in the UK.

Marcus Johns, a research fellow at the organisation, said the use of tax havens “hollows out our economy, keeps wages low, holds communities back, and enables money to be syphoned away into a globalised system of extraction”.

He said UKIB “must look seriously to prevent the use of tax havens and avoidance among the firms it supports” if it is to help achieve the levelling up agenda.


NextEnergy Capital SARL is not the only offshore company that could stand to benefit from UKIB funding.

Last month, UKIB announced it would loan £200m to the UK broadband company CityFibre to help roll out broadband to towns and cities in England and Scotland. But one of CityFibre’s largest owners, Antin Infrastructure Partners, manages its stake in the firm through the Luxembourg company Connect Luxco SARL.

Meanwhile, Goldman Sachs owns a substantial stake in CityFibre through a complex chain of ownership that stretches to the US state of Delaware. Corporations registered in Delaware that do not do business in the state do not pay corporate income tax.

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CityFibre offered no comment in response to questions about its corporate structure and the tax jurisdictions of its shareholders. Goldman Sachs and Antin Infrastructure Partners were also approached by openDemocracy but did not respond.

CityFibre earns the majority of its revenue from UK government contracts. The company recently raised £1.4bn in capital and secured debt finance of £4.9bn, which will allow it to compete for the government’s £5bn Project Gigabit broadband rollout.

Last year, Abu Dhabi’s sovereign wealth fund Mubadala also became a minority shareholder in CityFibre, and has injected more than £300m of capital. Post-Brexit, the UK has sought to boost trade links with Abu Dhabi, the capital of the United Arab Emirates (UAE) federation, which recently agreed to invest up to £5bn in the UK economy. In the last two years, Britain has licensed arms exports worth more than £350m to the UAE to support its war in Yemen.

Conservative Party donor

In May, UKIB announced plans to invest up to £100m in a newly created “sustainable infrastructure fund” managed by Octopus Investments.

Octopus claims it is “on a mission to invest in the ideas, industries and people that will change the world”. But openDemocracy can reveal that one of its founders and second largest shareholder, Chris Hulatt, is a Conservative Party donor who gave £2,500 ahead of the 2019 general election.

Octopus Investments told openDemocracy: “In 2019 Chris Hulatt donated to the local association of his constituency MP, Bim Afolami MP, who represents the Conservative Party. Chris is not a member of any political party and attends both Labour and Conservative party conferences. In his role as a co-founder of Octopus Group, Chris engages with politicians from all parties to champion the benefits of a strong entrepreneurial ecosystem for the UK economy.”

But in response to a specific question about whether Octopus Investments went through a tendering process before UKIB announced plans for the £100m investment, the company said it was unable to comment.

UKIB’s framework document states that it has two strategic objectives – “to help tackle climate change” and “support regional and local economic growth”. When the bank launched last year, Sunak said it would deliver “modern green infrastructure fit for the 21st century” and was part of a plan to “invest billions in a green industrial revolution” and “create hundreds of thousands of new green jobs”.

Yet less than 20% of the £817m allocated by UKIB so far has been loaned directly to green projects. This includes, according to documents released to openDemocracy by the Treasury under Freedom of Information law, a £43m loan to NextEnergy Capital Ltd to finance two solar farms for its renewable energy fund; a £107m loan to build an industrial facility for the offshore wind industry on Teeside Freeport; and a £10m loan to develop a new bus lane in the Midlands, which will have electric charging points at both ends.

The bank will also match-fund private sector investments up to £100m in Octopus Investments’ sustainable infrastructure fund and up to £207m in the NextPower UK ESG solar fund. But this approach has drawn criticism from the government’s trade envoy to Singapore, Lord Sarfraz, who told the FT: “We need UKIB to do the difficult direct deals, not outsource their responsibilities to third-party fund managers as once you invest in a fund you have very little influence over it.”

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