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Public Sector Construction Output 2004-2009
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This report
reviews the UK Private Finance Initiative, covering the
development of the scheme since its introduction in1992 to become a
major source of funding for government projects. The report
provides an analysis of the evolution of PFI, covering current
performance, procurement practice and key contractors, as well as
factors affecting future prospects. New government initiatives are
reviewed, as well as other key political influences, and the major
commercial and economic factors affecting PFI. |
Whilst private sector
funding of public sector projects can take the form of Public Private
Partnerships (PPP’s), the report specifically focuses on PFI which is
characterised by the transfer of risk from the public sector to the
private sector, effectively removing assets from the public sector
balance sheet. In contrast, PPP’s involve public sector organisations
and/or private stakeholders, as well as the private sector bearing some
major risk; in these instances some of the risk remains with the public
sector.
Introduced in the early
1990s’, PFI took some time to gather momentum, with just 7 schemes signed
before 1995. According to the 2007 spending review, approximately 600
projects have been signed for a total capital value of £59.6
billion. The number of projects increased steadily through the 1990’s
reaching a peak in 2000, and the combined capital value of schemes showed
a steady increase. This reflects a trend towards projects with larger
capital values, something which continued through the early 2000’s and
resulted in a rise in average values from around £36m in 1996
to £103m in 2007. There has been continued controversy over
the use of PFI, with opposition from trade unions and certain local
community groups. However, the Government remains committed to PFI as a
means of procurement.
PFI now plays a
significant role in public sector capital investment, accounting for
around 11% of capital investment in public services in 2006/07.
However, whilst investment through PFI has increased over the last few
years, this has been broadly in line with increases in overall capital
expenditure, with the PFI share remaining relatively constant.
Overall, the
Department for Transport is the leading sponsoring government
department, accounting for around 41% of PFI schemes by capital value. The
mix of sponsoring departments is gradually changing. Whilst the number of
grouped secondary schools and healthcare schemes coming on-stream has
increased significantly in recent years, certain Government departments
have exhausted most options for using PFI.
Estimates for capital
spending by the private sector, by department remain positive over the
next two years, with a reduction thereafter, though this may represent
conservative forecasting on the part of the individual government
departments, because the public sector construction output is set to rise
over the next few years and with the exception of the health sector, PFI
is still seen as a major mechanism for funding some of this growth.
Taking these factors into account suggests that the opportunities for PFI
will remain positive, perhaps through to the end of the decade.
AMA Research’s “Private
Finance Initiative in the UK 2008-2012” report is available in
hard copy or electronic format for £745 and can be ordered online at
www.amaresearch.co.uk
or by calling 0871 3103450.
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