BANKS INVESTING in the privately financed upgrade of London's Underground are nervous about backing the project in case the government scraps it after seven and a half years, a finance expert claimed recently.
They fear that the government could exploit the fact that there are reviews of the project every seven and a half years to terminate private finance contracts, leaving banks with unpaid loans.
These fears were expressed by WS Atkins Investments managing director David Clements at the ICE's 'National investment:
opportunities and risks' conference at Great George Street. The conference was organised jointly with the Institute of Actuaries.
Clements warned that banks had become increasingly nervous about government interference in privately financed infrastructure since the decision to push Railtrack into administration in October.
This came at a time when construction is returning to Victorian style project finance, he said, with companies and individuals ready to sponsor major infrastructure projects using their own money.
The entrepreneurial approach to infrastructure is being driven by the fact that much of Britiain's infrastructure is outdated, low interest rates and a huge maintenance backlog, Clements said.
Treasury chief secretary Andrew Smith told delegates that the government was committed to supporting the role of the private sector in delivering improvements to infrastructure.
He said that private investment in infrastructure was additional to public spending.
'Money raised from the private sector through arrangements like public private partnerships is not used as a replacement for public sector investment, ' he said. 'In fact, private sector investment will amount to less than 13% of total investment in public services this year.'