Sources close to the Treasury said Partnerships UK would now act only as an advisory body for first-time PFI clients, and charge fees.
It is understood that the Treasury steering group set up to establish a business plan for Partnerships UK and the government-appointed financial adviser NM Rothschild have dismissed proposals for Partnerships UK to hold equity stakes in schemes. Both said the idea was unworkable.
The plan will be seen as a snub to Partnerships UK deputy chairman Adrian Montague, who put forward the idea of a government-run investment bank that would hold equity in PFI schemes.
Under proposals unveiled by the Treasury last year, the role of Partnerships UK was defined as that of project manager for PFI schemes. It was also expected that it would build up equity stakes of £1bn in schemes.
However, a senior source said: “Most of the ideas that would enable Partnerships UK to take equity stakes in projects have been deemed unworkable. The only role left for it now is as a PFI adviser for first-time clients and offering advice to overseas governments on the PFI.”
The source continued: “It will still be doing something quite useful in an advisory role, but it is a much less exalted one than previously envisaged by Adrian Montague. It has been whittled away to nothing.”
The source added that clients would be able to pay for Partnerships UK services over the course of the PFI contract, which would give it an advantage over private consultants.
A spokesman for the Treasury said: “We’ve still got an open mind as to Partnerships UK’s exact role. We have talked about royalties for consultancy work but there is nothing definite.”
He added: “We have never said that Partnerships UK would be an investment bank. We have always insisted that it was a project manager, not an investment bank.”
A number of industry figures involved in the PFI had expressed misgivings about Partnerships UK taking large equity stakes while also acting as an adviser. Bill Tallis, head of the Major Contractors Group, said the decision to step back from taking equity stakes was sensible.
He said: “We’re delighted if the potential ambiguity of Partnerships UK being an equity holder in PFI projects has been removed. There is still an important role for it as an adviser, but the key issue is to ensure it can retain qualified people to do the work.”