Ministers must put measures in place to stimulate investment in energy infrastructure if the UK leaves the European Union (EU) without a deal in place, according to a think tank.

The E3G institute said that funding for clean energy had plummeted by 56% between 2016 and 2017 and that Brexit had produced a “decisive chilling effect on investment”.

The loss of EU funding mechanisms – such as the European Investment Bank (EIB) – risks “exacerbating” the investment hiatus, the think tank said in its latest report.

It said that, as well as acting as emergency stimulus, such a package was already needed to deal with the uncertainty caused by Brexit.

Longer-term issues

The report said that the UK Government must also develop options for addressing the longer-term gap in investment architecture left by EU funding.

Options already under consideration include maintaining access to finance through a new EIB subsidiary for non-member states.

Developing a UK national infrastructure bank is another possibility on the table.

But the think tank warned that a new EIB subsidiary would be difficult politically for the EU and that setting up a UK infrastructure bank could make the UK missing its fiscal targets.

E3G said: “Given the comparatively high ratio of capital expenditure to operational expenditure requirements of low-carbon assets, access to reliable sources of low-cost capital is essential if the UK Government’s climate targets are to be met at least cost to energy consumers.

“Brexit calls into question the UK’s access to several EU sources of low cost finance for clean energy infrastructure risking future increases to consumer energy bills.

“The UK should assess the potential for establishing a new multilateral infrastructure development bank with other interested countries, to address the shortfall in a way that would support the evolution of infrastructure systems and strengthen alliances, whilst avoiding any impact to the government’s balance sheet.”

> Download the report