Get Started With Our Free Course: Essential Financial Modelling

The Beginning of the end? U.K. PFI contract expiry

When I was setting out in PPP / PFI as a fresh young analyst, the idea that these 20+ year deals would one day reach contract expiry seemed an unimaginably far-off prospect.

However, as I survey my many grey hairs in the mirror, that time is now upon us and there are interesting times ahead for UK PFI as the early pathfinder projects come to an end.

Here are some interesting stats from the NAO:

Here’s a link to the NAO report published in June.

The Public Sector is gearing up, through the Infrastructure and Projects Authority (IPA) to deal with the gargantuan task ahead, of managing the hand-back of the assets of 700+ projects over the coming years.

Careful analysis will be needed to evaluate the strategic options available for each project to ensure optimum value for money is achieved. These options could well include ongoing private sector involvement through; extensions, refinancing or re-tendering of portions of the service.

The Public Sector will need a carefully coordinated and well-resourced approach to match the challenge of negotiating all of these contracts with the small number of funds that hold the majority of the assets. If there is one key message from the early schemes to reach expiry, it is that early preparation will be key.

The analytical challenge will be different from each perspective: the managers of large funds invested in PFI projects will want sophisticated portfolio analysis; the individual local authorities with just a single project to manage won’t have the resources to negotiate alone and will need support from more centralised bodies.

End of the Beginning?

As the first chapter of PFI in the UK begins to draw to a close, there is an opportunity to reflect on the many successes (and failures) of the PPP model.

PFI has its critics, but there is no question that it has delivered a huge capital investment programme, leveraging in private sector finance and expertise whilst transferring risk away from the Public Sector.

Unlike conventional procurement, the assets will be handed back in good condition having been well maintained and operated over the life of the contract.

If we are to meet the infrastructure needs of the UK in the years to come, we need a replacement for PFI and quickly.

Is this the beginning of the end, or the end of the beginning? Please let us know your thoughts by getting in contact with us.

Oliver Durston

Author

Oliver Durston

View Profile

Related Articles

Whats-really-going-on-at-OpenAI-Modellers-Miscellany-Gridlines

What’s really going on at OpenAI?

“I have not failed. I’ve just found 10,000 ways that don’t work” – Thomas Eddison If you have modelling or AI-related news, resources, or events that you’d like to share with 48,000+ of the world’s best modellers, please email cassandra.brightley@gridlines.com. AI // What’s really going on

Autumn Statement 2023: Boosting Business Growth in the UK

Autumn Statement 2023: Boosting Business Growth in the UK

Minimum tax has been discussed in the international tax arena for some time now, and certain jurisdictions already apply some form of ‘minimum tax’ in the domestic setting, such as corporate minimum tax (CMT) in Ontario, Canada and the corporate alternative minimum tax (CAMT) in the

Our Work

We have the privilege of serving clients who are doing big, innovative things and who push us to do our best work. We like that. We support them with financial modelling, valuations and due diligence.