Citywatch

Railway cuttings part one
The government has said that the Railtrack debacle is irrelevant to the future of PPPs, which will go ahead because they are the best way of increasing investment in services. Andrew Smith, chief secretary to the Treasury said PPPs, such as the proposed part-privatisation of the London Underground, were completely different from the flawed Railtrack privatisation. 'There are clearly defined obligations in a PPP and the government will adhere to its contracts, just as it expects the private sector to,' he said.

Railway cuttings part two
Certainly the future of rail maintenance contracts has not bothered City analysts as companies involved in PPP and PFI work have just signed five-year contracts with options to renegotiate for another five years. The government has already reassured the contractors that it is committed to improving the network.

Construction firms' PFI work booms
Deena Mattar, Kier's finance director has warned that if investors perceive there is more risk in PFI work, then that will drive up the cost of PFI projects. Although costs may climb, construction companies involved in PFI contracts have been stampeding to announce new contracts in order to calm the City after shares in Carillion and Jarvis took a sharp fall. Carillion, a major PFI player has a record order book of £4.7bn — of which 86 per cent is in PFI services and infrastructure management. It also owns GT Rail, which maintains 20 per cent of the UK rail network on which the government is committed to spending £3bn over the next 10 years.

Hospitals and schools
Balfour Beatty is the preferred bidder on an £86m hospital contract in Blackburn. Jarvis has announced the completion of a £300m schools project in Liverpool and Kier announced a £68m schools project in Essex. Waterman Partnership, the consultancy group, has won PFI work including two hospitals and nine schools in Cheshire. In the past year, profits increased 21 per cent to £3.5m — after stripping out an exceptional gain from the sale of its head office.