‘Safe haven’ sectors under threat as private finance dries up
The UK Government is planning to bail out participants in the failing Private Finance Initiative for procurement, sources revealed in the UK press this week. The private finance element of many of the ambitious education, healthcare and transport plans had been faltering as a direct consequence of the credit crunch, one source said last week, “At the moment, people are not willing to lend long-term. This is about getting the PFI firms access to long-term credit.”
Education and healthcare had been seen as safe havens in amongst the malaise of the residential and commercial sectors but are also heavily reliant on private finance. Launched in 1992 the scheme was devised to put the onus of construction risk onto the private sector. However, Vince Cable the Liberal Democrat Treasury spokesman was critical of the whole scheme, saying last week, “The PFI process is in difficulty because commercial partners will not come forward. It was always a questionable financial mechanism and now it is now in the deepest difficulty.”
An official statement is expected this week to address speculation that about 100 school and hospital projects worth £2.4 billion GBP are effectively on hold. In the last six months, only a handful of projects have started.