A national infrastructure bank based in northern England will start backing projects with the private sector from next spring as part of the Government's agenda to 'level up' the regions.

The institution, which was widely expected to be part of today's Spending Review, will replace some of the activities of the European Investment Bank (EIB) after Brexit.

The EIB is owned by EU nations and has provided funding to Transport for London (TfL) in recent years for upgrades at Bank and Victoria underground stations as well as the extension of the Northern Line. 

The Government said the new bank, which will back projects that support the country's 'levelling up' and net-zero targets, will "provide more targeted support for UK projects" than the EIB did.

Rain Newton-Smith, the CBI's chief economist, said the bank "has the potential to crowd in private finance", which will be "crucial" to boosting the economy. 

However, City figures who voiced concerns about the plans earlier this year fear that they will be frozen out.

Allen Twyning, head of debt origination at Pension Insurance Corporation (PIC), said the bank must seize the "golden opportunity" to back the pensions of older citizens with assets that will benefit future generations.

"Our expectation is that institutional investors like PIC will have tens of billions of pounds to invest in the UK’s infrastructure over the next 10 years," he said.

"It is crucial therefore that any national infrastructure bank works alongside us and our peers. This was a major criticism that was levelled at the EIB, which effectively froze out institutional investors."

The Government also revealed that £519m of funding earmarked for 2021 was going to support the Covid-19 loans schemes, mainly to pay off banks' interest rate payments on the hugely popular bounce back loans programme. The loans, worth up to £50,000 each, are interest free for their first year.

The Government guarantees 100pc of any losses banks suffer if borrowers fail to repay loans issued under the scheme, which was rolled out in a hurry to help more than a million businesses survive the Covid-19 lockdown.

Excluding the loan schemes, £557.5m is being pumped into capital funding for the British Business Bank - the state bank in charge of running emergency business loan schemes - so that it can further support struggling small businesses and start-ups. This includes a £56.5m pot aimed at providing an extra 1,000 loans for entrepreneurs.