The GLA had previously raised £800 million through the Government’s ‘Public Works Loan Board’. This is repaid through the Business Rate Supplement (BRS) collected from the capital’s larger businesses to pay towards Crossrail. However last October the Government made borrowing through the Board around one per-cent more expensive.
To ensure value for money for the capital the Mayor has sought more economical options in the financial markets and the issuing of this bond is around 0.17 per cent cheaper than the current option. The GLA is committed to delivering at least equivalent savings on further borrowings , and so a total of £65 million could be shaved off the cost of long - term borrowing for Crossrail.
This strategy gives the GLA the option to repay its £3.5 billion loans earlier, potentially shortening the term of the BRS which is forecast to run until 2035. Alternatively it equates to an entire year’s BRS levy on all large businesses in outer-London, or a £4,000 saving per business property.
This is the first time in over 17 years that a local authority has issued a bond to raise capital finance and the GLA intends to use this type of borrowing for further funding of its capital programme.
The Mayor Boris Johnson said: “Crossrail is going to transform our city but it must be cost effective , especially for London’s businesses. This is a great example of the public and private sectors coming together and delivering an innovative solution to bear down on borrowing costs. I hope this is a model local government can develop for other important improvements we make to the capital and beyond.”
Andrew Géczy, CEO of Wholesale Markets and Co-head of Lloyds Bank Corporate Markets said:
“It is more than 17 years since a mainstream local authority has secured finance via the public markets, so this transaction is significant as well as innovative. We are delighted to have assisted the GLA to access the public markets and we fully expect other local authorities to follow their lead.
“The note issuing programme framework we have created for the GLA will be of real benefit to the local authority sector as a whole. Local authorities wanting to raise financing, even relatively small sums in comparison to that raised by the GLA, will be able to access the capital markets to help them deliver their local projects and to do so in a more cost effective manner, and in a manner which is more administratively efficient as well.”
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