Former PfS boss to set up £1bn development pipeline

The company set up by former Partnerships for Schools chief executive Tim Byles is planning a £1bn development pipeline, and is set to sign deals with Bouygues, Willmott Dixon and Morgan Sindall that will put them first in line for work.

The three firms are understood to be poised to sign deals to become investors in Cornerstone, which was set up by Byles when he left PfS in June. Sources close to the deals said that it was expected that “a majority” of contracting work would be made available to the firms, on top of their investment role.

The news comes as Byles revealed that John McDonough, the outgoing chief executive of Carillion, has been appointed chairman of Cornerstone, in a move that will further boost the industry expertise behind the vehicle. McDonough, along with Capita founder Rod Aldridge and former Financial Times chairman Sir David Bell, is already a shareholder in the company.

Byles told Building that he expected Cornerstone to have a development pipeline worth £1bn over the next three years, across sectors including education - such as free schools - residential and healthcare, in particular, care for the elderly. The company will operate as a mutual, converting surplus public sector assets into community facilities, and splitting profit between investors and the third sector.

Byles said: “We are working with 12 local authorities, looking at their estate and the opportunities for the first batches of projects.” He added that Cornerstone was also in discussion with six health trusts over converting unwanted acute facilities into community schemes that could include residential and education elements. The firm has also received interest from the Scottish government and overseas authorities.

Under the terms of their deals with Cornerstone, Bouygues, Willmott Dixon and Morgan Sindall will take a share in the company’s profit, as well as having the opportunity to invest in additional individual schemes.

It is understood that the firms will be first in line for a large amount of Cornerstone’s pipeline, including through mini competitions that will involve “mainly the investor partners but not exclusively”, according to sources close to the situation.

However, Byles said that Cornerstone would also seek to use “existing frameworks and supplier arrangements” set up by local authorities if appropriate.

He said: “On large schemes we will be working closely with our investors, but we’ve got good relationships with larger and smaller firms, and are interested in getting the balance right.”