The story so far – PFI lessons learnt
PPPs have underpinned some of the UK’s most recognisable infrastructure over the last three decades – from hospitals and schools to major transport links like the M25 widening and London Underground upgrades.
First introduced in 1991 under the Private Finance Initiative (PFI), PPPs were expanded by successive governments to deliver essential infrastructure while spreading cost and risk over time. As of 31 March 2024, there were 665 PFI contracts in place with a capital value of £50 billion, 79% of that value covering social infrastructure and 21% on economic infrastructure.
The PFI model delivered clear benefits: faster delivery, lifecycle cost management, and innovation from private operators. Yet over time, inflexible contracts, opaque risk-sharing and high-profile failings led to declining confidence and the May government’s moratorium on new PFI and PF2 agreements in October 2018.
This moratorium has left a gap in long-term financing models, with this gap mattering more than ever. Today’s government has outlined ambitious infrastructure investment plans through ‘UK infrastructure: A Ten-year Strategy’ that will require both public and private investment to materialise.
With PFI lessons informing the development of modern PPP models, the government must be bold in its approach to PPPs. With over 1,000 new PPPs reaching financial close worldwide since 2018, there is a real opportunity for the government, informed by PPP best practice, to put private sector experience and expertise at the centre of its infrastructure delivery plans.
The government’s position – scope to go further
Since coming to power in July 2024, the government has made positive progress in tackling the barriers to infrastructure development in the UK. The flagship Planning and Infrastructure Bill will deliver the reforms required to diminish the powers of NIMBYs, the establishment of the National Infrastructure and Service Transformation Authority (NISTA) strengthens the integration of infrastructure strategy and delivery, and the UK’s digital infrastructure pipeline provides greater clarity for investors and supply chains seeking to support the government’s infrastructure ambitions.
Alongside these important developments, the government has shown that it is willing to once again consider the role of PPPs in supporting its infrastructure ambitions. ‘UK Infrastructure: A Ten-Year Strategy’ outlines that the government will consider the use of PPPs in projects and sectors where there is a revenue stream, appropriate risk transfer can be achieved, and value for money for taxpayers can be secured. More specifically, the government outlines that PPPs will be considered in certain types of primary and community health infrastructure and for taxpayer-funded public estate decarbonisation projects such as the installation of solar PV, battery storage and low carbon heating solutions.
Whilst the government is open to PPPs, the CBI believes it could set out a more ambitious vision towards utilising different types of PPPs to deliver on its infrastructure ambitions. The government should be open to exploring how PPPs could be delivered where a project does not result in a revenue stream and must avoid implementing a ‘one size fits all’ PPP model that would neglect infrastructure projects’ differing financing needs.
Put simply, the government needs to be less risk averse when it comes to exploring PPP project applicability.
The opportunity – modern partnerships for a modern economy
With public finances under pressure and significant investment required to stimulate the economy, modern PPPs offer a proven route to deliver national renewal – faster, smarter, and more sustainably.
The opportunity is clear: by embracing a broader suite of PPP models, the government can unlock much needed private capital to deliver critical economic and social infrastructure – from clean energy and digital connectivity to housing, health, and regional regeneration.
Not only will private capital be unlocked, but private sector experience and expertise leveraged to maximise project outcomes. This is exemplified by a 2024 study of 1,000 building projects in Germany, which found PPPs can be significantly more efficient over the lifecycle of an asset – in large part due to lower construction costs linked to more timely delivery and more efficient operation of assets due to private sector involvement.
Lessons have been learnt from PFI shortcomings and modernised partnership models widen the toolkit available, allowing governments’ to choose the right approach for a sector’s risk profile, fiscal constraints, and policy objectives. This point is critical – not all PPPs are created equal, with different sectors requiring different models. Whilst the regulated asset based (RAB) model may suit nuclear and water infrastructure, Contracts For Difference has proven highly effective at leveraging significant private capital into the delivery of renewable energy projects.
Our members are already showing what could be possible if the government is to fully acknowledge this point and collaborate effectively with the private sector to explore how different types of PPP financing models could best deliver our varied economic and social infrastructure needs:
Case studies
New Homes Hexagon – contractual partnership/corporate joint venture
The key priority of Lambeth Council’s Housing Strategy is more affordable homes. Its New Homes Programme looks to accelerate the delivery of affordable housing against a backcloth of 28,000 families on the housing waiting list and 4,700 households in temporary accommodation. To advance the programme, the Council has appointed Countryside Properties (UK) Limited to deliver a portfolio of an initial six sites, known as the ‘New Homes Hexagon’, with the option to introduce other sites. Subject to planning, Countryside will deliver circa 50% affordable housing across all the schemes, of which 70% will be social rent.
The Council and Countryside will work together to deliver at pace, aiming for a start on site of 227 affordable homes by 2030. The positive impacts of residential led development are broad, including new, high-quality affordable and family sized housing, the delivery of new community spaces and improved public realm - all benefitting the health and wellbeing of residents.
In the context of the general budget pressures on the Council (in common with most Councils), Lambeth have sought and agreed a partnership arrangement which commits their land in return for Countryside’s technical expertise and access to funding. Although the Council will retain an involvement in the delivery of each site, it will rely on the broader design and development/project management expertise of Countryside. The overarching Partnership Agreement will govern how each site is to be brought forward under a Business Case (approved by the Council) and then delivered via a development agreement.
The partnership allows for a site to be funded by the Council (under a standard design and build contract) but as an exception; ordinarily each site will be funded and developed by Countryside. A critical element of the partnership is the delivery of the required levels of social housing across the portfolio and the ability for the Council to acquire that housing first to meet its duties as a housing authority. Nonetheless, the Partnership Agreement provides flexibility to the Council to prioritise the delivery of additional affordable housing (more than the required minimum) or maximising land value.
This type of partnership arrangement, across a portfolio of sites, pools the land assets held by a local authority with the private sector’s resources in a way that encourages collaboration and an alignment of common purpose. This can (as with Lambeth) be captured in a contractual partnership or potentially under a corporate joint venture. In either case, this project (not unique to Lambeth) shows that “PPP” arrangements have been (and are being) pursued to deliver social infrastructure.
Northumbria Health and Care Academy – third party development
Assura worked in partnership with Northumbria Healthcare NHS Foundation Trust to deliver the Northumbria Health and Care Academy on the site of the Northumbria Specialist Emergency Care Hospital in Cramlington. The Academy is a cutting-edge centre of training excellence for nursing, midwifery, and allied health professional students. More than 3,000 students have already been through its doors since it opened in 2024.
Using third party development to bring in private sector investment, the project involved Assura providing the capital, plus the development, design, and project management expertise to deliver a much-needed facility. Assura also took on the risk during the development of the project and managed all the contractors to secure delivery. Assura’s expertise led to the building being the first UK healthcare building to achieve GOLD certification™ from the International WELL Building Institute.
Using third party development enabled the Trust to deliver a training centre which has provided opportunities for students from the local community to gain placements and earn while they learn. Bringing a GP practice into the building meant that the CDEL impact of the scheme was also reduced as well as enhancing the health services provided in the community.
Using third party development in partnership with a company like Assura has meant that the NHS in the North East has been able to secure the future of health education in the region at lower risk and lower upfront cost than would otherwise have been the case.
Brent Cross Town energy infrastructure – long-term concession
The Brent Cross Town regeneration in North London demonstrates how effective public-private collaboration can deliver sustainable energy infrastructure at scale. Acting as technical advisor throughout procurement and design, Buro Happold supported the development of a concession agreement with Vattenfall focused on providing low-carbon heat at an affordable cost.
The advisory role helped ensure that the technical framework was robust, innovative, and aligned with long-term sustainability goals. This structure enabled clear allocation of responsibilities, with risk shared transparently between partners according to capability.
The resulting infrastructure will supply energy to thousands of homes and businesses, cutting carbon emissions, improving resilience, and delivering long-term operational efficiencies for the community.
The Brent Cross Town project illustrates how early-stage technical collaboration and clear risk management can help achieve low-carbon outcomes while maintaining value for money and delivery certainty.
Silvertown Tunnel – PFI
The Silvertown Tunnel, which opened on 7 April, marks a major milestone in improving cross-river connectivity and public transport options in East London. This was a complex and challenging project to deliver a new road tunnel under the Thames and it was delivered on time and on budget. The project provides a new Thames crossing that enhances resilience across the road network and supports more reliable travel for people and businesses.
The scheme was funded through a PFI model. Under this arrangement, Riverlinx was responsible for financing, constructing, and operating the tunnel, securing £1.2 billion in private investment. The company will also maintain and renew the tunnel’s systems and equipment for the next 25 years.
Revenue from the road user charging scheme applied to both the Silvertown and Blackwall Tunnels is being used to make availability payments to Riverlinx, covering debt repayment and ongoing maintenance. Any surplus will be reinvested in London’s transport network, ensuring long-term public value.
The tunnel is already delivering benefits across several areas:
- Improved traffic flow and road network resilience
- Enhanced cross-river public transport, including new bus services and concessions
- Better air quality through reduced congestion
- New business opportunities and improved local connectivity
- Support for active travel, including people cycling.
The Silvertown Tunnel demonstrates how well-structured PPPs can deliver critical infrastructure efficiently, share risk effectively, and provide lasting benefits for local communities and the wider economy.
What we will be doing leading into the Budget and beyond?
We are calling on the government to use the Budget to demonstrate its commitment to exploring how a broader set of PPP financing models can support its infrastructure ambitions at both the regional and national level. It is imperative that the government avoids a ‘one size fits all’ approach when it comes to PPP delivery and we will be working with our members to further evidence how a broader application of PPP financing models can best deliver our economic and social infrastructure needs.
For more information on our PPP work, please contact Mark Goldstone, UK Competitiveness Manager.