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Downturn looms for Scots

Scotland struggles to get PFI projects going as SNP insists on profit cap for private backers.

Engineers were this week fearing a construction downturn in Scotland after a government initiative to promote privately financed infrastructure has failed to deliver any new projects.    

The Scottish Futures Trust (SFT), set up by the Scottish National Party (SNP) administration in December 2007, following an election pledge to abandon PFI, has taken on proposals for two privately financed community healthcare “hub” schemes.    

But procurement has yet to get underway, and there is mounting concern that there will be no new projects to replace other major Scottish PFI construction schemes which are due to finish this year.    

“The stark facts are that construction work with a total capital value of £352M in schools and hospitals and other projects with an additional capital value of £782M will all be finished by the beginning of November,” said  Association for Consulting and Engineering Scotland chairman Jim Tod.   

 “When those projects dry up there will be a large hole to fill and we need to find a solution now if we are to avoid a meltdown in the construction sector. The sector cannot afford a gap in project delivery between the previous funding regime and this one.”    

The SNP has attempted to limit the profits that can be made by private firms delivering new infrastructure promoted by the SFT. It claims this will reduce the overall cost of privately-funded public works to the taxpayer.    But one finance expert accused the SNP of confusing profit with the legitimate pricing of risk, and said developers and banks were unwilling to work with a funding model that increased their risk exposure.    

 “The SNP is hung up ideologically on the very concept of ‘profit’,” he said. “What it continues to miss is that the issue is not private sector profit. It’s private sector at-risk capital. There is no profit if the private sector messes things up.”    

The SFT was to have issued bonds for public projects. But the Scottish government lacks the legislative powers to issue bonds and has been forced to explore other ways of raising finance from the private sector.    

A Scottish government spokesman said: “The Scottish Futures Trust (SFT) is already playing an active part in supporting infrastructure investment in Scotland, and has taken charge of the programme delivery for two community hub developments in the south east and the north of Scotland to provide purpose built community services.”   

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