What is the National Wealth Fund?

The NWF was first announced by Labour in opposition, and was formally set up in October 2024. ²⁹ National Wealth Fund, ‘UK Infrastructure Bank becomes the National Wealth Fund’, press release, 14 October 2024, www.nationalwealthfund.org.uk/news/uk-infrastructure-bank-becomes-national-wealth-fund  It is not, as the name suggests, a sovereign wealth fund, which invests a nation’s budget surpluses for the benefit of future generations. Instead, the government describes it as the UK’s ‘impact investor’ and hopes that initial investment in projects by the NWF will catalyse further investment from the private sector.  The NWF evolved out of, and replaced, the UK Infrastructure Bank (UKIB). 

By the end of this parliament, it will have been capitalised by the government with a total of £27.8bn: £22bn of existing capital from UKIB (of which around £3.1bn had been invested by April 2024), and a further £5.8bn committed over the course of this parliament. This makes the NWF much smaller than many European policy banks, such as the German KfW and French Bpifrance, which each invest about 1% of their nation’s GDP annually – the NWF will only reach 1% of UK GDP in 2028. ³⁰ King A and Jameson D, Designing a UK fiscal framework fit for the climate challenge, Centre for Economic Transition Expertise, 11 July 2024, https://cetex.org/publications/designing-a-uk-fiscal-framework-fit-for-the-climate-challenge/    

The NWF is wholly owned by the Treasury but it operates at arm’s length and has an independent board. 

Does the UK have other policy banks?

Yes. The UK has a history of using policy banks to deliver government objectives, including the SME-focused British Business Bank (BBB), the Scottish National Investment Bank and the now-defunct UK Green Investment Bank. Before leaving the EU, the UK was also eligible for funding through the European Investment Bank, which partly funded projects like the Channel tunnel, Scottish offshore wind and the Elizabeth line. 

In 2024, on becoming chancellor, Rachel Reeves changed the fiscal rules to account for financial assets, including those created when the NWF or other policy banks loan money to or buy equity stakes in businesses and projects. This is likely to increase the attractiveness of using policy banks like NWF to deliver policy priorities.

How has the National Wealth Fund evolved from UKIB?

The government has expanded and rebranded UKIB rather than setting up a new body from scratch because UKIB already fulfilled a similar function. The NWF has inherited many aspects of UKIB including its Leeds headquarters and its classification as an executive non-departmental public body. 

The UKIB was set up in 2021 to facilitate the financing of infrastructure to deliver post-pandemic economic growth and the transition to net zero. The NWF will continue to invest in UKIB’s existing priority sectors – clean energy, digital, transport, water, waste and natural capital – but will commit the additional capital into five new sectors outlined in the manifesto: green hydrogen, green steel, carbon capture and storage, gigafactories, and ports. The initial announcement of the NWF indicated that it would also subsume the British Business Bank,  but this no longer appears to be the case. ³³ HM Treasury, ‘Boost for new National Wealth Fund to unlock private investment’, press release, 9 July 2024, www.gov.uk/government/news/boost-for-new-national-wealth-fund-to-unlock-private-investment  

The government aims to pass legislation to broaden the legal mandate the NWF inherited beyond infrastructure investment. The NWF will also have a larger suite of financial tools with which it can ‘crowd in’ investment. ³⁴ HM Treasury, National Wealth Fund: Mobilising Private Investment, GOV.UK, 14 October 2024, www.gov.uk/government/publications/national-wealth-fund-mobilising-private-investment   

How does the NWF operate?

The NWF has two core functions: private sector finance and local authority services. 

With the former, the NWF aims not just to correct market failures (which is the usual rationale for public sector intervention) but to shape new markets for emerging technologies. Investments must meet a triple criteria of: tackling climate change and driving growth; generating a positive financial return; and mobilising private finance. ⁴⁴ National Wealth Fund, ‘About Us’, (no date) retrieved 6 February 2025, www.nationalwealthfund.org.uk/About-us  Crucially, the government hopes it will attract £3 of private investment for every £1 of public money – although it is not clear on what basis it expects this effect. The requirement to make a financial return is laid out in the NWF’s investment principles. ⁴⁵ National Wealth Fund, ‘How we invest: principles and approach’, (no date) retrieved 6 February 2025, www.nationalwealthfund.org.uk/how-we-invest-principles-and-approach  

The NWF hopes to crowd in private finance by virtue of its association with a project (a ‘halo effect’), or by ‘de-risking’ uncertain investments. This could be done by guaranteeing the money investors lend, or taking equity stakes in riskier projects, or simply by having stable priorities for emerging sectors such as green infrastructure. 

The NWF has a range of financial instruments to invest in projects alongside with private sector. Examples include:

• Equity investment – the NWF has invested £28.6m into Cornish Metals Inc., becoming a major shareholder in the company, to help finance the re-opening of a Cornish tin mine. ⁴⁶ National Wealth Fund, ‘National Wealth Fund drives growth with a £28.6m investment into Cornish Metals Inc, facilitating the domestic supply of tin’, press release, 28 January 2025, www.nationalwealthfund.org.uk/news/national-wealth-fund-drives-growth-ps286m-investment-cornish-metals-inc-facilitating-domestic  
• Debt – the NWF has topped up a £75m debt commitment made by the UKIB to Netomnia (full-fibre broadband operator) with an additional £25m loan. ⁴⁷ National Wealth Fund, ‘Netomnia secures £25 million from National Wealth Fund to accelerate broadband rollout’, press release, 24 October 2024, www.nationalwealthfund.org.uk/news/netomnia-secures-ps25-million-national-wealth-fund-accelerate-broadband-rollout  
• Guarantees – the NWF has given £750m as financial guarantees to support loans provided by Lloyds and Barclays banks of £500m each to finance retrofit of social housing. ⁴⁸ National Wealth Fund, ‘National Wealth Fund, Barclays UK Corporate Bank and Lloyds Banking Group join forces to unleash £1 billion to retrofit social housing’, press release, 17 October 2024, https://www.nationalwealthfund.org.uk/news/national-wealth-fund-barclays-uk-corporate-bank-and-lloyds-banking-group-join-forces-unleash  

For now, the NWF crowds in private capital on a deal-by-deal basis, but its stated medium-term strategy is that the private sector will start to invest in the fund directly. ⁴⁹ HM Treasury, National Wealth Fund: Mobilising Private Investment, GOV.UK, 14 October 2024, www.gov.uk/government/publications/national-wealth-fund-mobilising-private-investment   

On the local authority side, the NWF offers advisory services and low-cost finance for local authority infrastructure projects, again continuing a function provided by UKIB. For example, it has provided £92m financing to improve coastal flood defence barriers in North Wales. In January 2025, the government announced that the NWF will work with local leaders to support places to build investment and projects pipelines linked to regional growth priorities. ⁵⁰ HM Treasury, ‘Chancellor unveils plan to turbocharge investment across the UK’, press release, 24 January 2025, www.gov.uk/government/news/chancellor-unveils-plan-to-turbocharge-investment-across-the-uk

How does the NWF measure the impact of its activities?

The NWF has limited capital and is designed primarily to encourage more investment overall – indeed, it does not want to ‘crowd out’ private investment by investing in things the private sector would have invested in anyway. So the NWF aims to measure ‘additionality’: the impact of its activities that would not have happened otherwise. To calculate this, it measures the level of impact it has had relative to a counterfactual scenario in which it had not intervened.

But NWF investments are also intended to make a financial return. Currently, it is estimated that its additional capitalisation of £5.8bn this parliament will achieve financial returns of £135m by 2029/30. ⁵¹ HM Treasury, Autumn Budget 2024: Policy Costings, October 2024, https://assets.publishing.service.gov.uk/media/6721d2c54da1c0d41942a8d2/Policy_Costing_Document_-_Autumn_Budget_2024.pdf   

Are there any questions over the NWF’s role?

Many of the existing frameworks for the NWF’s remit, strategy and the way it measures impact are inherited from UKIB. The government intends to update these to reflect the NWF’s broader mandate and new methods, but it is yet to say how it will do this. It is also not yet clear how the NWF will complement bodies like the British Business Bank and Great British Energy, which will also have a role investing in clean energy projects alongside the private sector, to avoid a scenario where multiple public bodies are competing for the same projects and staff. ⁵² Jameson D and Howat M, ‘Labour’s Great British Energy and National Wealth Fund: good ideas that need more work’, blog, 2 July 2024, https://blogs.lse.ac.uk/politicsandpolicy/labours-great-british-energy-and-national-wealth-fund-good-ideas-that-need-more-work/