The Private Finance Initiative Market - UK 2010-2014

AMA Research
March 4, 2010
92 Pages - SKU: AJLA2618789
Countries covered: United Kingdom

AMA Research have published the 6th edition of the report ‘Private Finance Initiative Market - UK 2010-2014’. Incorporating original input and primary research the report provides a wide-ranging and informative perspective on the sector, covering the historical development of the Private Finance Initiative, the principal factors currently impacting upon it and forecasts through to 2014.

Launched in 1992, the Private Finance Initiative has evolved to become a major source of funding for capital sector schemes across a wide range of government departments. To date approaching 700 projects have achieved financial close with a combined capital value in excess of £55 bn. Project signings have been significantly affected since 2008 by the global economic and fiscal crisis, with the aftermath likely to continue to impact upon the market over the medium term. The report provides a comprehensive review of recent developments, key current issues and areas of controversy, also indicating key potential opportunities over the next few years.

Key areas of coverage in the report include:

Overview of the UK PFI Market - Market development and recent trends. Number of projects and capital value. Sector mix among the leading government departments Key influences including government policy, legislative and financing issues. Forecasts & future prospects.

Focus on the Major Departments and Devolved Governments - Sector size, five year trends and forecasts. Review of major schemes. Planned programmes and key areas of opportunity.

Review of Supply Structure and Leading Providers to the PFI Market - Types of service provider, role of consortia and SPV’s. Changing market structure. Market positioning and company profiles of major contractors.

Areas of particular interest:

Recent financing issues arising from the global economic crisis and their impact on the PFI market.

More pessimistic outlook for government expenditure over the medium term, reflecting the need to reduce the level of PSNB.

Analysis of recent growth areas and identification of future opportunities including those arising from programmes such as Building Schools for the Future and developments in the waste management sector.  

Some of the companies featured include:

Amey UK Plc, Balfour Beatty Plc, BAM UK, Bouygues UK Ltd, Bovis Lend Lease Ltd, Carillion Plc, Costain Plc, Galliford Try Plc, Interserve Plc, Jarvis Plc, John Laing Plc, Kier Group Plc, Laing O’Rourke Plc, May Gurney Integrated Services Plc, Miller Group Plc, MJ Gleeson Group Plc, Morgan Sindall Plc, Robertson Group, Rydon Group, Semperian PPP Investment Partners, Serco Group Plc, Shepherd Building Group Ltd, Sir Robert McAlpine Ltd, Skanska UK Plc, Vinci Plc, Wates Group Ltd, Willmott Dixon Group, WS Atkins Plc

Key areas covered in the report include:

MARKET REVIEW

The PFI market - number of projects signed and capital value, projects achieving closure 1997-2009, forecasts from 2010-2014.

Key market influences and future prospects - impact of government policy and legislative influences, macroeconomic factors, increasing maturity.

Major developments - increasing project values, procurement and financing issues, sector-specific programmes.

Current market mix among key Government Departments. Factors influencing shift in mix. Changing departmental requirements. Key areas of opportunity.

Financing Issues - recycling of equity, impact of recent economic downturn, launch of the Treasury Infrastructure Finance Unit (Tifu).

Other Key Developments and Issues - Administration, Controversial Issues and increasing market maturity.

FOCUS ON THE MAJOR DEPARTMENTS

Analysis by sector of major users of PFI covering in detail Transport, Health, Defence, Education, Environment and the Devolved Governments.

Sectoral analysis of PFI projects signed - total number and capital value, five year trends and review of major schemes.

Outlook by sector - forecasts of private sector capital spending for key departments through to 2014, planned PFI programmes, anticipated areas of opportunity.

Leading contractors and consortia within major sectors.

MAJOR PROVIDERS

Supply Structure - Types of service provider, role played by SPV’s and consortia.

Key Trends - Impact of market maturity, consolidation resulting from mergers, acquisitions & market withdrawals, increasing dominance of large conglomerates.

Market Position of Leading Contractors - analysis of market position among the leading 20 construction companies, sector strengths. Role of FM Providers.

Company Profiles of Leading Contractors covering 28 major providers - outline of company size, principal activities, growth trends and recent history, areas of specialisation, sector strengths and major contracts.

BACKGROUND - EVOLUTION OF PFI

Historical Development of the Private Finance Initiative from its inception in 1992 through to the present day.

Impact of Major Reviews, Government Initiatives and Legislation - key developments arising from the Bates Review, NAO Performance Reviews, PFI: Meeting the Investment Challenge, PFI: Strengthening Long Term Partnerships and EU Legislation.


Additional Information

Launched in 1992, the Private Finance Initiative has evolved to become a major source of funding for capital sector schemes, currently accounting for between 10-15% of total capital investment in public services. According to the Treasury Signed Projects List, to date a total of some 666 projects have achieved financial close with a total capital value of £55.1 billion.

Despite expenditure revisions which have involved the Government bringing forward £3bn from 2010-11 to 2009-11 to stimulate the economy, the PFI market has been significantly affected by the global financial crisis in late 2008 and into 2009. This has reflected in particular the difficulty experienced in raising the necessary finance.

Between 2005 and 2009 project values have more than doubled to a current average of around £156m. One contributory factor has been the development of ‘batched’ schemes following the introduction of the £20m threshold for PFI projects, as well as more recently the impact of the extensive Building Schools for the Future (BSF) programme.

The Private Finance Initiative has been the subject of controversy since its inception, with key areas under the spotlight including the affordability of repayments on long term concessions and lack of flexibility in the face of changing requirements. Despite this the present Government has remained committed to PFI as a means of procurement.

Use of PFI within Scotland, Northern Ireland and Wales is significantly affected by the political stance taken by the leading parties in the devolved governments. The current majority parties in Scotland and Wales are at present largely opposed to the use of PFI.

The majority of PFI projects are Design, Build, Finance and Operate (DBFO), encouraging market dominance by consortia and large conglomerates with divisions providing construction and support services. Furthermore, the high bid costs involved tend to favour larger companies or consortia able to absorb the costs in the event of a failed bid.

The last few years have seen considerable consolidation among PFI providers, resulting from mergers & acquisitions within the construction and FM sectors, market withdrawals and business failures. In addition, high bid costs and the risks involved have led an increasing number of contractors to limit their exposure to PFI.

It should be noted that the extent of the projected Government cutbacks and the impact at a departmental level may be significantly affected by the outcome of the next election, due by June 2010 at the latest. However, while there is expected to be a downturn in the level of project signings over the next few years, the long FM term contracts associated with the majority of schemes will continue to support a significant and growing level of repayments to participating contractors over much of the next decade.

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