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18 February 2019
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In search of the Brits

As Brexit looms, should the market be concerned about the lack of interest from British contractors in being PPP bid leaders?
In search of the Brits

We seem to live in a world where contradictions are the order of the day. Whether it’s those at risk of losing the most from Brexit shouting the loudest to leave the EU, or US Republicans opposing their own president’s plans because of fears it could lead to a Democrat president clamping down on gun control, there is a topsy-turvy nature to politics these days.

And these contradictions have found their way into the infrastructure market. the country that did so much to deliver a model of privately financed investment into infrastructure is now searching for a new solution to this same conundrum.

However, while many consider new ways to create a politically acceptable model, many of the British construction companies that helped drive the PFI programme in the first decade of the 20th century are far less keen on investing in infrastructure today. This was highlighted by last year’s report into the two proposed rail links into Heathrow airport, which found that there was good interest in a PPP-style model from overseas firms, but not so much from UK ones.

And it is not just for these two projects. Where there are other PPP-type schemes happening in the UK, it is understood that many UK contractors are not keen to be involved, other than as part of the supply chain. This is clear from the Welsh A465 MIM project, where the bid teams have bene dominated by international – particularly Spanish – contractors. And in England, it is understood that the decision to scrap PF2 for the A303 and Lower Thames Crossing schemes has resurrected interest from British contractors in these deals.

Clearly, the impact of Carillion’s collapse is still weighing heavily on many firms’ minds, with the level of risk that UK projects have required private partners to take no longer sitting comfortably with them.

So as Wales looks to continue its MIM model, and Scotland looks to follow suit, the question remains as to who will be driving consortia to bid for these projects.

At a time when the UK’s relationship with the European Union is far from certain, there will be some unease about this reliance. While Colas’s decision to pull out of the A465 bidding is understood to be down to a “lack of resources”, questions will inevitably be raised over whether Brexit played a part in determining where to allocate those resources in the first place. Colas has not commented on its decision to pull out of the running, but companies based outside the UK, in all types of business sectors, are known to be focusing their resources away from the UK, at least until it becomes crystal clear both how the UK will survive the Brexit process and how it will look to trade with the rest of the world.

At present, there are plenty of international companies that have bet on Britain despite Brexit, so the industry does not need to panic just yet.

But as issues such as the skills shortage threaten to be exacerbated by Brexit, there are a number of existential threats to the use of PPP beyond simple political distaste.

Maybe that goes some way to explaining the politicians’ excitement over the Thames Tideway model, which attracted plenty of interest from investors, with contractors relegated to the supply chain, or signed up to specific construction packages. With fund managers left to worry about the money, the construction firms (British or otherwise) can simply get on with what they are best at: construction.

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As Brexit looms, should the market be concerned about the lack of interest from British contractors in being PPP bid leaders?

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