Government refuses to set timeline for new-style PFI despite just two deals reaching close this year
The number of PFI projects agreed in the first four months of 2012 has collapsed by 85% on the same period in 2011, after the government put the system under review in December last year.
The collapse, according to the latest figures from project finance data firm Dealogic, shows that the value of PFI projects also nosedived, down 63% to just £280m, after only two deals were signed before the end of April.
This fall is on top of a similar collapse in 2011 on the previous year, with the value of agreed deals around a third of that agreed in 2010.
Drops in PFI projects
The government has refused to say when it will set out reforms for PFI after issuing a “call for evidence” for reforming the system in December 2011. In March, construction minister Mark Prisk angered the industry by claiming that no contractors had raised concerns with him about the hiatus in PFI projects, despite concerted industry lobbying.
The collapse in new PFI deals comes after the Treasury’s commercial secretary Lord Sassoon assured the industry, when the call for evidence was issued, that PFI projects that were already in the pipeline would not be affected.
The review comes on top of international problems with securing project finance, as banks rein in long-term lending before the introduction of the Basel 3 global finance regulations.
However, the figures show that the scale of the collapse in PFI deals in the UK is running far ahead of that seen across the globe.
Stephen Ratcliffe, director of the UK Contractors’ Group (UKCG), said the collapse was a result of the review of PFI, on top of the delays to the Priority Schools Building Programme, which was to use PFI, but for which procurement of contractors has been delayed.
Ratcliffe said the government needed to address the problem “speedily”. He said: “Everyone wants to see a clear government position on PFI, and clearer signals as to what the policy
is likely to look like in future. As yet there is no timetable.”
Richard Threlfall, head of infrastructure at KPMG, said: “The industry is being crushed between the loss of commercial activity and the government turning off the tap on its own spending. It needs projects now.”
A Treasury spokesperson said the review had received over 150 submissions and results would be published “in due course”.