PPPs ‘vital to £500bn programme’

Speaking at the Global Infrastructure Forum, organised by Building, James Stewart, chief executive of Infrastructure UK, said the PPP model had survived the credit crunch. “If you look back at PPP deals since 1 April last year, about 45 have been signed, with a capital value of more than £5bn. If you go back to March 2009 we were extremely worried about any deals being financed.”

About a third of the UK’s planned investment in the next 10 years will come from the public sector, with the rest made up by private investment, according to Stewart. This is in spite of the Conservatives’ reservations about the widespread use of PFI.

Terry Morgan, chairman of Crossrail, said big infrastructure projects could not be funded by the private sector alone. However, he added that other cities in the UK would adopt the funding model being used on Crossrail, where local businesses contribute to the cost. “They’ve got to be able to demonstrate that there is a long-term demand.”

But more needs to be done to attract private investors. Spence Clunie, senior managing director of Macquarie Capital Advisers, said projects such as high-speed rail were too large for one financial institution to handle on its own at the initial stages. He said incentives were needed from public authorities to get things started, such as tax breaks, with the chance of refinancing further down the line.

Meanwhile, Stephen Dadswell, principal of corporate finance at Transport for London, said it was still committed to PPP despite the failure of maintenance consortium Metronet and the recent decision to make Tube Lines a wholly TfL-owned entity.

He said part of the failure of PPP in this case was that the 30-year funding stream wasn’t forthcoming and that the PPP arbiter didn’t act to make sure the parties worked together properly.