Financial stability throughout the lifecycle of a PFI contract

The UK is set to spend over £9bn this year on PFI contracts – and a total of £48bn in the next five years. This level of spending will continue until we see the first peak in contracts expiring around 2030. Expiry will see assets worth £14bn (their original capital value) transferring back to public ownership. 

The pressures on schools’ and local authorities’ budgets will be felt across the public sector over the next few years. As contracts enter the expiry phase, costs increase with millions of pounds added to major contracts – the biggest of which are for the NHS. 

Are you planning early and collaborating? 

Although there’s guidance on managing PFI contract expiry, we need to focus on the importance of early planning and collaboration. This should be taken into account during the operational phase and looked at from a system level perspective, like we see from Integrated Care Boards. 

This offers a greater opportunity for collaboration across the public sector to ensure there’s no value leakage from the contract. One Integrated Care System was found to be spending over £160m per year across the NHS and local authority PFI contracts. 

Do you recognise your challenges? 

It's clear there are challenges across the public estate, with the latest figures showing that around 38% of maintained schools are beyond their initial design life. Backlog maintenance costs in the NHS total £11.6bn, an increase of 13% from the previous year. 

One key challenge is supporting a smooth transition that doesn’t compromise the quality of services. Transfer of asset data is critical to the expiry transition. The public sector has to make sure that the knowledge and skills developed during the PFI are retained and integrated into public estate management systems. Trusts and Boards have to navigate complexities involved in transferring assets and services back into public ownership and ensure buildings are safe from day one.

Have you identified your opportunities? 

PFI is not just a debt – it could be an opportunity. The challenge faced when managing complicated PFI contracts will bring to light the opportunity to streamline operations, optimise resources, and enhance the quality of services available to the local community. With effective navigation of PFI contracts, long-term financial stability can be fostered and the focus can be shifted back to delivering the quality services people in our local communities deserve. 

Where are you in your PFI journey? Contact me for more information on how to turn your challenges into your biggest opportunities.

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