UK’s Wates Group calls for a return to PFI

Wates Group has set out plans for a new investment model to establish public-private partnerships to fund the construction of schools, hospitals and housing, which it calls the Alliance Investment Model.

It said the model draws on successful approaches in Scotland and Wales, improving PFI with co-ownership and better oversight to improve value for money.

Wates Group’s CEO Eoghan O’Lionaird is unveiling the plan today (21 May) at the Real Estate and Investment and Infrastructure Forum in Leeds, ahead of the government’s upcoming infrastructure strategy.

In a white paper calling for the adoption of its proposed Alliance Investment Model, Wates urged the government to focus on:

• Assets or groups of assets across the public sector limited to a value above £100 million.
• Picking contractors with a “proven track record and a strong balance sheet”.
• An alliance procurement approach to ensure designs are standardised and used repeatedly to replicate buildings, saving time and money.
• Balancing risk and reward for all parties.
• The creation of a new public-private partnership government delivery body sitting under the National Infrastructure and Service Transformation Authority Experienced. This would oversee negotiation, awarding and management of a new wave of public-private partnerships.

O’Lionaird said, “The government is facing an acutely challenging fiscal picture. To finance infrastructure delivery, it must access private capital to move at the speed required and drive economic prosperity.

“Our Alliance Investment Model outlined in our white paper is a fresh approach to funding the next generation of UK infrastructure, improving on PFI, and is the only viable route to unlocking the housing, schools and hospitals the country urgently needs.

“If we back the right assets and pick the right partners for projects over the next decade and beyond, using standardisation to drive efficiency, alongside shared responsibility and effective oversight, we can deliver a new chapter of quality infrastructure investment.”

PFI was a UK government procurement model used to create public-private partnerships, launched in the early 1990s, using private sector investment to fund, build and maintain public assets. Former Chancellor Philip Hammond announced in 2018 that he would abolish PFI for future building projects.

Critics questioned whether it offered true value for money or simply resulted in debt for construction projects being placed “off-balance-sheet” although the National Audit Office found in 2003 that it represented good overall value for money.

The UK government published a working paper on a 10-year infrastructure strategy in January this year. A new strategy, which will set out the government’s approach to investment in infrastructure projects, is due to be published soon. Meanwhile, in April, the government merted the National Infrastructure Commission (NIC) and the Treasury’s Infrastructure & Projects Authority (IPA) into a new body called the National Infrastructure & Service Transformation Authority (NISTA).