EU to give £300m lifeline to school building programme

The government’s school building programme is to receive a £300m bail out from the EU to stop it falling further behind.

The package has been agreed in principle by the European Investment Bank (EIB). It will be directed at schemes that are part of the £45bn Building Schools for the Future (BSF) initiative and which contain a PFI element. The move comes after UK banks indicated that they had problems in funding schemes.

It is understood that the package will be directed at schemes that are coming up for financial close, but where lenders have been reluctant to commit to deals. Projects that could be eligible for the rescue deal include the £300m Barnsley scheme, where Laing O’Rourke is preferred bidder.

Tim Byles, chief executive of delivery agency Partnerships for Schools, said: “We are working extremely hard to manage the current challenges and minimise any delays. This includes securing a commitment in principle from the EIB.”

Under the deal, the details of which have yet to be worked out, the bank would fund 50% of the PFI element of selected projects. A decision on the schemes to benefit is likely to be made in the first quarter of this year.

The move comes as a select committee report this week warned that the success of BSF could be under threat from private sector unwillingness to enter into PFI deals.

The report, from the Department for Children, Schools and Families committee, also called on the government to clarify the extent of its review of BSF.

The developments emerged in the week that Gordon Brown announced that the £3bn of extra investment in public works, including schools, announced in November’s pre-Budget report should create 100,000 extra jobs.