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What does the future hold for PFI?

It is no secret that the coalition government wants to change elements of the PFI procurement method.

But how it will be done and what the impact is on civils is yet to be made clear.

Certainly if any new PFIs go ahead they will likely have to demonstrate good value for money.

A report published by the Public Accounts Committee last week into value for money of hospital and housing PFIs found that they were used only because there was “no realistic alternative”.

It added that “at a time when public finances are so tight, government must use the weight of its buying power to negotiate with major PFI investors and contractors a better deal for the taxpayer.”

EC Harris partner Russell Gates warns of interference causing delays.

He says a reliable tranche of projects kept the supply chain geared up and investors confident with a tangible deal flow.

Maybe with that in mind, publically the government has not committed to any new PFI strategy - or similar alternative - but has been approving planned PFIs on a case by case basis.

Gates says the PFI market is becoming tougher and deals are slowed down by ideas such as the “club deal” which involves large numbers of banks in a syndicated deal.

He says these factors add up to create a significant risk of the UK continuing to lose talent to emerging PPP markets that do have sturdy plans.

“There is a danger. All our experienced resources are turning up in Europe, South America, Canada, Australia, all these places that are pushing hard into models that were based on the UK.

“Brazil for example is looking to do 19 deals in health sector alone. It’s a massive pull on PFI out of the UK.”

Gates says his wish for 2011would be a renewed commitment from the government to PFI. If elements of PFI are to be changed, he says, it is time to come clean, because delaying is only adding to the concern among investors, developers and the rest of the supply chain.

He says: “Be clear about what the future is and really worried about our best looking at other markets.”

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