Post-election fears for PFI projects

29 April 2010

Contractors fear that the general election could delay much-needed PFI-funded work by slowing down contract awards over the next year, Construction News reported.

Both the Liberal Democrats and the Conservatives are likely to pursue new methods of setting out PFI deals, while Labour has also promised amendments to the system.

But with public spending set to be slashed to repay the national debt, contractors are anticipating a large amount of work will be channelled via the PFI in the medium term.

Adrian Ewer, chief executive at PFI specialist John Laing, said: “I would expect a fallow period of government decision-making but the PFI industry should be going flat out about 18 months to two years after the election.”

Viridor's business development manager Philip Bines added: “Contracts close to financial close could be delayed and are the most at risk. With others, the procurement process could be extended.”

PricewaterhouseCoopers agreed there could be a hiatus in the market, but insisted it would be strong again after that. The consultancy’s construction global leader Jonathan Hook said: “Post-election the sector could be in flux. There may be a slowdown after the election as the Government comes to terms with its finances. “But fundamentally, there needs to be a public-private partnership. PFI will be called something different but it will still exist.”

In anticipation of a period of uncertainty, some authorities have brought forward schemes, with a number of BSF projects in particular hitting the market this spring. The Birmingham roads PFI - worth £2.7bn and won by Amey - is expected to reach financial close in the next month.

Projects with a capital value of £64bn have been signed off under PFI since 1992. The Labour government has said 

it will set up Infrastructure UK to prioritise investment plans, as well as using a Green Investment Bank and the Treasury’s Infrastructure Finance Unit to fund work.

But Adrian Ewer warned that these government bodies may not be fully effective.  “The Green Investment Bank will not have the same rigour and discipline as a commercial bank. The European Investment Bank is already there and providing a similar role,” he said.

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