Financial turmoil compels financiers to team up to fund Building Schools for the Future projects

The credit crunch is forcing consortiums working on the government’s £45bn school building programme to bring extra banks on board to get the funding needed to go ahead, it has emerged.

James Stewart, the head of the public sector delivery body Partnerships UK, said banks were increasingly forming “financing clubs” to fund Building Schools for the Future (BSF) schemes, rather than backing projects alone.

Stewart, who was speaking at the Partnerships for Schools (PfS) annual conference in London last Thursday, said: “The banks are increasingly reluctant to underwrite projects, so schemes are having to bring in more of them. Unfortunately, we’ve not reached the bottom of the market.”

The increasing difficulty in finding funding is a sign that financial institutions do not view the public sector as immune to the market turmoil.  

The banks are increasingly reluctant to underwrite projects

James Stewart, PUK

However, Stewart said the schools programme was benefiting from a “flight to quality” of firms and investors. He said: “BSF is at the smaller end of the market and has a committed pipeline. There’s absolutely no room for complacency, as it’s a moving feast, but for now it’s okay. BSF is a good place to be and certainly better than the banking market.”

Tim Byles, chief executive of Partnerships for Schools, said that despite the challenging market conditions and the need to involve more banks “nothing has been delayed or stopped”.

Byles added that PfS was looking at closer relationships with so-called Express Lift schemes in the healthcare sector. 

More on the BSF programme at www.building.co.uk/archive