Connectivity brings opportunity. Opportunity brings growth. Growth brings prosperity.

That is an observation that can be applied from the use of England’s waterways as the arteries of the industrial revolution through to today’s use of superfast broadband.

One of the Bank’s first deals when we opened our doors three years ago was with Gigaclear, helping to bring high-speed broadband to rural properties across the UK. Our support helped to connect 250,000 homes. Gigaclear marked another first in 2023, benefitting from the Bank’s first guarantee, bringing in £240m of capital.

Fast-forward to yesterday, and the announcement of our 9th deal in digital infrastructure, a £35m loan to Wildanet to connect 20,000 properties across Cornwall, servicing some of the most difficult to reach areas in the UK, and supporting economic growth, productivity, and social wellbeing.

Digital has been one of the Bank’s five priority sectors from the outset, and we are proud to be supporting the UK’s digital roll out. Connectivity is essential to support businesses transitioning to net zero. Nationwide full-fibre broadband for homes and businesses in every part of the UK will boost productivity and aligns with our mission to drive regional and local economic growth.

Three years on from our first digital deal, what hasn’t changed is the continuing demand for financing from this sector, or the scale of investment required to meet Project Gigabit’s target of nationwide coverage by 2030. Altnets are struggling to find the financial backing they need, particularly new borrowers who don’t have a list of “go to” banks they can call upon. So, in this context, where should the Bank target its finance to bring the most benefit to this sector?

What’s clear is that the Bank can’t be in every digital deal. Even if we continue to deploy our capital at our current ratio of investment to private finance mobilised, there will still be a financing gap.

Like most commercial organisations, where possible we will continue to support existing clients as we look to protect our investments. But importantly, we are open to supporting new clients. All of our digital deals will support businesses committed to connecting the hardest-to-reach areas of the UK, where there is no planned connection in the next three years. We will prioritise altnets delivering large BDUK procurement contracts. In many cases, these are newer entrants, who are trying to raise private finance in a challenging market.

Of course, ‘hardest to reach’ can be defined in different ways.  It could be due to rural location or – in the case of our recent deal with Hyperoptic - technically challenging locations to connect. And it is a problem that might be addressed in partnership with either an established player in the market or a relatively new entrant.

Our participation in deals is intended to give confidence to other investors, in turn crowding in private finance. We are clear that our role isn’t to be a lender of last resort.  

We are built to be agile and respond to market need, so you may occasionally see us operate outside of this strategy, but only if there is a clear and strong need for it and, of course, if it meets our investment principles.

It is becoming increasingly clear that we will also need the private sector to meet us in the middle. To adjust their risk appetites to get behind the bigger cause. This applies as much to the Bank’s other priority sectors – clean energy, transport, water and waste - as it does to digital infrastructure.

For our part, we have £10bn of financial capacity to provide guarantees, and this is likely to be our most effective tool to support this sector. We’ve spent time engaging with the market and other lenders on our guarantee product, and have successfully deployed it to offer assurance to private lenders.

But we will only provide a guarantee where there are underlying banks or financial institutions also ready to take on a meaningful amount of risk alongside us. It's important that lenders are actively involved and engaged in the debt stack, to ensure they are still there for the refinancing in years to come, and to ensure a sustainable digital market.

Whether through debt, equity or guarantees, we look forward to helping to fulfil government policy, and most importantly, through targeted investments, bringing that connectivity that has been so essential to our nation’s story and to homes and businesses across the length and breadth of the UK.

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