Abandoning the private finance initiative would lead to long term under-investment in infrastructure and maintenance, warned John Laing chief executive Adrian Ewer last week.
Ewer said that PFI contracts must be allowed to continue during the recession because they lock in maintenance commitments over many years, making them relatively immune to public spending cuts. His firm is a major player in the PFI sector.
“People compare this recession to the post war period, but what happened was decades of underinvestment. PFI changed this. If you take away PFI, you will see a return to this period.”
The drying up of credit following the collapse of the banks had put a number of potential PFI projects like the Manchester waste project in jeopardy, forcing the Treasury to set up a dedicated unit to plug cash shortfalls. Manchester PFI has, however, come good and the banks are much keener to lend, Ewer said.
“At least two UK banks have been given targets to lend,” said Ewer. “However people at a corporate level are de-leveraging so it’s hard for them to borrow.
The Treasury is a last resort lender, and not a source of funds to be relied on when negotiating deals.” Ewer added that John Laing was planning to expand into North America.