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Undeniably the credit crunch has made it harder to raise finance, and caused (further) delay to some projects. In fact figures on deals signed look pretty grim, with only 30 projects closed in 2008. See chart below.
The Government’s response - the PFI rescue package announced earlier this month - is designed to kickstart 110 projects by injecting £2bn of senior debt into the market. The Treasury hopes this will rescue £8bn of stalled projects.
No doubt this will be a big help, but don’t expect sudden results. Increasingly banks are ‘clubbing’ together to spread PFI risk, and with more parties involved in each deal (not least the Treasury), the timescales to completion will inevitably stretch out.
That said, we remain positive. The real strength of this market is its size and momentum in the long term. The current pipeline of PFIs is in excess of £13bn across a range of diverse sectors from education to waste.
The message: as always, PFI is just slower than you think.
Zoom chartTim Nixon is a Manager at Credo.
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