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Re-jig at Skanska PFI arm after £27m hit

Skanska is carrying out a root and-branch overhaul of its Private Finance Initiative business after being hit with a £27 million blowout on three schemes.

On Tuesday, the UK arm’s Swedish parent said it would be taking the charge in the first quarter of the year after costs escalated on three PPP projects.

The total value of the projects in question, which are believed to be all in the healthcare sector, is about £1.2 billion.

Skanska is involved with five major PFI health deals - the £1 billion Barts and the Royal London scheme; the £174 million Walsall Manor hospital; the £320 million Central Nottinghamshire Hospitals at Sutton-in-Ashfield and Mansfield; the £334 million Coventry New Hospitals; and the £333 million Derby hospital.

Skanska’s UK chief executive David Fison declined to name the projects but it is understood the three problem contracts are those at Nottinghamshire, Coventry and Derby.

Mr Fison said the firm has now split its PFI business into two with major projects such as hospitals, prisons and defence schemes sitting in the public sector unit, with schools and local authority work being handled by a regional business unit.

He said: “We didn’t have an adequate financial spotlight on our PFI work. We had commercial guys looking at projects but finance is different, so we have moved to strengthen that.

“There are also three key disciplines that we have to improve: design management; forecasting of out-turn cost; and speeding up commercial responses to changes made to projects by clients.”

The firm has set up a commercial support unit to scrutinise any contracts it signs to ensure they will not trigger problems down the line. Mr Fison said the hit would not affect Skanska’s ambition to bid for PFI work, claiming that across its total portfolio profits remained above the industry average.