Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Highways England boss given no warning of PFI axe

Highways England was given no warning before chancellor Philip Hammond scrapped PFI and PF2 in the Budget, Construction News can reveal.

The roads client had been banking on PF2 to provide the funding for two of its flagship schemes: the £1.6bn A303 Stonehendge Tunnel and the £6bn Lower Thames Crossing.

“We weren’t pre-informed of the announcement,” Highways England CEO Jim O’Sullivan told Construction News when asked about PF2’s axe in the Budget.

He added that, during subsequent conversations with government, it was confirmed that “the two projects […] will be appropriately and adequately funded”.

However, Mr O’Sullivan acknowledged that the details behind this commitment remained undecided. 

“I don’t think anybody knows what the mechanism for that is yet. It needs to be worked out,” he said.

Despite this, the chief executive insisted that the abolition of PF2 would “absolutely not” delay either project, as their ongoing development was being funded by public money.

Mr O’Sullivan told CN that the transition to a new funding model would be aided by the fact “it’s easier to go from a PFI financial model to a traditional contracting financial model”.

“We have the time to work out what it actually means,” he said.

As recently as April this year, Mr O’Sullivan had given his support to the use of PF2 on roads projects

“There are about £400m successful PFIs in operation, PF2 is an improvement on PFI and seems to work well on roads,” he said at the time.

In October 2017 he called on international firms to get involved in “flagship projects and the private finance opportunities they represent”.

However, last month’s Budget saw the chancellor criticise both PFI and PF2 for not offering value for money or sufficient transfer of risk to the private sector.

Responding at the time to Mr Hammond’s announcement, Highways England said the Treasury remained committed to both schemes and that “their financing is not a determining factor in deciding whether they get delivered”.

Last week Highways England announced the 13 winning contractors for its £8.7bn regional framework, as well as who will deliver the initial 18 packages of work under the deal.

Readers' comments (1)

  • The statement, “it’s easier to go from a PFI financial model to a traditional contracting financial model” seems to miss the point - who is paying? PF2 is off balance sheet, a traditional Contract would have to come out of HE/DfT coffers. With RIS2 projects already identified I assume there is no source of funding here? So either HE has to cut schemes to pay for these two or the DfT needs to find additional funding. Neither of these will be quick options and my prediction is at least a year delay before comes to market.

    Unsuitable or offensive? Report this comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.