Balfour Beatty is keen to engage with the potential shift towards private finance for infrastructure projects proposed by the government. This move follows their established history with public-private partnerships (PPPs).
- The company’s CEO, Leo Quinn, expressed interest in applying their expertise in forthcoming private finance models.
- The previous use of PPPs was deemed costly, necessitating a new approach to funding infrastructure.
- Balfour Beatty maintains a stake in existing PFI projects and seeks alignment with new governmental strategies.
- Future participation will hinge on economic competitiveness, especially given recent shifts in infrastructure financing and legal challenges with past models.
Balfour Beatty’s enthusiasm for integrating into the government’s shift towards private finance comes amid speculation on reintroducing elements of public-private partnerships, albeit under a new financial framework. According to CEO Leo Quinn, the company aims to utilise its extensive expertise in PPPs to participate in and expand with new opportunities that may arise. Despite expressing eagerness, Quinn noted the importance of understanding how such financial models will be presented, especially as previous PPP schemes were criticised for being financially burdensome.
Balfour Beatty’s history as a frequent contractor and investor under the erstwhile PFI regime remains relevant. The company still holds several PFI investments, such as Connect Plus, responsible for M25 maintenance and upgrades. Quinn articulated a clear intent to remain involved where their capabilities are best matched with potential projects. However, he acknowledged the uncertainty surrounding governmental directions in this space.
The considerations for future participation highlight the economic dimension of PPP schemes, particularly concerning the high cost of equity, which Quinn indicates must tie intrinsically with construction delivery to ensure competitiveness. With a backdrop of rising legal disputes over previous PFI schemes, the need for a reformed financial model is evident. This follows previous calls for a new financing approach by leading contractors, including Balfour Beatty and Morgan Sindall, before the recent governmental shift.
As reported by the Financial Times, a new plan under consideration involves the £9 billion Lower Thames Crossing, which might adopt a PFI-like model reminiscent of the regulated asset base approach seen in the water sector. Here, investors fund projects and earn returns via increased utility charges, offering a potential long-term investment structure. The Treasury assures that while the original PFI model is obsolete, the government continues to engage with private investment to bolster economic growth.
Balfour Beatty’s recent financial performance underscores its strong market position, reporting a worldwide revenue increase to £4.7 billion and pre-tax profits rising to £112 million in the first half of 2024. Despite a slight dip in UK turnover, the company improved its profit margins. Quinn’s conversation about the business’s future profitability indicates differing internal expectations, illustrating the company’s strategic focus amidst this evolving financial landscape.
Quinn’s comments and Balfour Beatty’s strategic intentions reflect a forward-looking stance in navigating the evolving infrastructure finance landscape.
