More than half of all UK construction clients are still completely unable to secure project finance for speculative developments, more than two years after the credit crunch first hit.
According to data from KPMG, 56% of clients report that project finance is unavailable, with an overwhelming 94% reporting that it is either unavailable or challenging to get hold of. Just 6% say it is readily available for speculative projects.
However, the situation is far better for low-risk projects, with more than half reporting that finance is available.
The findings come as the Public Accounts Committee attacked the government for spending too much on propping up expensive PFI schemes during the credit crunch. It said that the drive to do PFI deals during the recession, when lenders were charging much higher rates, will add £1bn to the cost of those schemes over 25 years.
Margaret Hodge, chair of the committee, said the government should have examined alternatives to PFI. She said: “At the very time that the taxpayer was providing unprecedented support to the banking system, the banks were increasing the cost of financing PFI projects by up to a third, and transferring risks back to the public sector.
“The high interest charges to which new PFI projects have been subject will be locked in for up to 30 years, even when the project is running.”