Opposition criticise Treasury scheme to safeguard 110 stalled projects via direct lending
The government is to guarantee funding for £13bn of PFI projects by lending directly to stalled projects.
Treasury secretary Yvette Cooper told the House of Commons today the measure would safeguard 110 PFI projects in the pipeline.
The news follows huge industry concern over PFI projects which have been unable to reach financial close due to the inability of private companies to secure bank lending to support them. Research by construction data company Barbour ABI for Building said £9.46bn of PFI schemes are currently on hold.
Cooper said the government would “lend to those PFI projects that cannot raise sufficient debt finance on acceptable terms, lending alongside commercial lenders and the European Investment Bank.” However in addition she said the government would be prepared to fund the so-called “senior debt”, meaning it could be the prime funder of PFI schemes.
The government declined to state the value of the fund being set up to lend to stalled PFI projects, saying it would lend according to “market conditions” in order to free up the 110 sites.
The move has already been criticised by opposition politicians who accuse the government of unnecessarily propping up a failed method of procurement. However, Cooper said starting procurement all of over again now would cause huge delay. She said: “Switching to alternative procurement methods or conventional funding and for these projects at this late stage would incur significant additional delays or risk projects failing. For that reason we have decided that providing additional debt finance is the most effective way to get construction underway swiftly and support the economy.”
Michael Ankers, chief executive of the Construction Products Association described the move as “very welcome indeed.”
Also commenting on the announcement, John Cridland, CBI deputy director-general, said:
“Getting PFI deals moving will help public service improvements continue and protect jobs in the construction and services industries. Here as with all parts of the economy, we need credit to start flowing again and we must hope that this and the range of other government measures prove effective.”