The UK should adopt a similar private financing model to that used in the construction of London’s £5bn super sewer, the chief executive of construction giant Costain said.
The approach at the Thames Tideway Tunnel, which holds similarities to the old Labour government’s private finance initiatives (PFIs), has been “very successful,” Alex Vaughan told City A.M. in an interview.
“It’s a much more agile, less risky contract, which I think gets the best value in delivering the infrastructure,” he said.
PFI’s were used heavily under the last Labour government before being axed in 2018 amid concerns they delvier poor value for money.
Chancellor Rachel Reeves is mooting bringing back a new form of PFI to power up Britain’s flagging infrastructure sector, while keeping costs of the government’s balance sheet.
Reports have suggested the possibility of a PFI-style deal to finance the delivery of the £9bn Lower Thames Crossing (LTC) tunnel, which Vaughan said “lends itself to private sector investment.”
OId PFI contracts guaranteed investors taxpayers money. However, the Thames Tideway model involves adding additional charges to London residents’ water bills instead. The Sizewell C nuclear power plant project in Suffolk adopts a similar model but is currently awaiting a crucial final investment decision amid talks with private investors.
“We’ve been part of that program and I think that’s where the government will end up going, as opposed to the historical PFI that we saw decades ago,” Vaughan said.
“It’s proven it has delivered great value to the customers and for the taxpayer, so I think that’s the model they’ll go for.”
Keir Starmer’s government has pledged to ramp up building in Britain after the sector suffered a torrid year under the Conservatives, which included the cancellation of HS2’s northern leg, mounting costs and delays at a string of the UK’s biggest infrastructure projects.
Vaughan, who has previously warned of “short-termism” in the infrastructure sector, said he had been “very encouraged” by the new government. “They’ve definitely signalled that they want to pull together a 10 year plan, which I think is what’s necessary… so I think we’re encouraged by the fact that there is going to be that strategic long term view.”
“I’m still pushing them hard for a cabinet minister for infrastructure, but I’ll take it in bitesize chunks,” he added.
Vaughan’s comments come after Costain unveiled a £10m share buyback for investors in its half-year results as profit rose to £16.3m.
A HM Treasury spokesperson said: “The government retired PFI and PF2 models in 2018, and there has been no change to this policy.
“The government is committed to harnessing private investment and restoring growth, and will work in partnership with the private sector to deliver its missions.”