20 June 2019

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Cautiously optimistic

Last week’s conference in Wales has suggested that there is growing confidence in the UK PPP market
Cautiously optimistic

‘Cautiously optimistic’ appeared to be the phrase on most people’s lips at Financing UK Infrastructure 2018, held at the Celtic Manor in Wales last week.

Not only was that the phrase that most people voted for in the survey at the start of the day when considering the UK market, it was also one that many of the speakers gladly identified with as they gave their views on the state of the UK PPP industry.

And that confidence in the market was bolstered by the public sector speakers. Matthew Vickerstaff of the Infrastructure & Projects Authority (IPA) set out a series of opportunities that are already in the market or that will shortly be coming to market for the private sector to take advantage of.

Similarly, Peter Reekie, chief executive at the Scottish Futures Trust, continued to talk up the opportunities for private investment as part of the Scottish government’s overall plans for new infrastructure investment that will emerge in the coming months and years – although all recognise this is now a little further down the road.

More immediately, the Welsh government kicked things off with talk of their mutual investment model (MIM), and a new approach to delivering schools – which will see a Hub-style delivery partner procured for the whole of Wales – was the newest of the announcements made over the course of the conference.

Speaking to people at the event, it was clear that many remain busy despite the fact that many of the opportunities described by the public sector speakers remain, for now at least, little more than that: opportunities that may (or may not) come to fruition at some point down the line.

Perhaps worryingly for the industry, what is keeping many people busy right now is not the new deals, but the fallout from existing contracts.

Trying to tackle existing issues in ongoing PFI and PPP deals may kep many in the market busy, but it is probably not doing a great job in terms of the promotion of the model among those that have to live with these contracts.

As a result, there were calls from some at the conference – particularly Aviva’s head of debt, Darryl Murphy – to make sure that the industry starts to get things right when given the opportunity on future deals. Learning from the past needs to be a hallmark of any future PPPs if they are to be given a fair chance in the future.

No matter whether deals support the argument to use PPP or create a difficult environment, however, one thing clearly hung over the conference: the potential for a Labour government.

While most still think that Jeremy Corbyn will never make it to Downing Street, the fact that the conference was held in the same week as Labour’s annual party conference was a reminder of the difficult political environment the market is operating in. Corbyn’s shadow chancellor, John McDonnell, had told the party faithful in Liverpool earlier in the week that he remained committed to ending PFI contracts. The problem is that this is ideologically driven, meaning no matter how well any particular contract may perform, it will not be saved by a Labour government determined to purge the public sector of private interference.

So it would seem that there is good need to remain cautious – even if the signs are that the current government is beginning to warm to the potential of PPP investment.

In the event that Labour does come to power, though, the PPP professionals will doubtless be driven to the Celtic lands to find business.

With hopes of more MIM deals and the prospect of a renewed Scottish pipeline, the devolved governments would welcome them with open arms.

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