Education projects in crisis as funding dries up

Four of the UK’s largest schools projects are seeking emergency European funding as they face delays despite the government’s pledge to accelerate its investment programme.

Building reports that four projects are understood to have applied for a slice of the £300m outlined by the European Investment Bank to keep PFI projects on track. These are a £1.2bn BSF scheme in Birmingham, a £350m scheme in Salford and Wigan, a £200m Southwark scheme and a £300m Barnsley scheme.

Sources close to the schemes told Building that although the projects are scheduled to reach financial close towards the end of this financial year or early next, their funding was threatened due to banks’ reluctance to commit to long term deals.

Talking to the Guardian, Tim Byles, head of Partnerships for Schools, the government delivery body responsible for BSF, admitted that no banks had invested in BSF since Christmas, adding that to help revive schemes, the Treasury might also offer shorter deals, interest-rate caps or guarantees to investors.

The news came as the government appointed former audit commission chief executive Sir Andrew Foster to undertake a review of its delayed and underfinanced £5bn college upgrade, managed by the Learning and Skills Council.

The LSC’s troubled programme to rebuild or refurbish 200 further education or sixth form colleges by 2011 has stalled after too many colleges applied for funding and projected land sales designed to part-fund the scheme fell foul of the credit crunch.

According to press reports, government skills Secretary John Denham is “furious” the LSC has allowed the building work to stall just as the government is supposed to be injecting public funds to kick-start the economy.

Contract Journal reports that the LSC college programme is now likely to be transferred into the BSF system. A government source told the magazine that a funding crisis had ‘moved the possibility [of a transfer] significantly up the agenda.’