A potential private finance initiative is being considered for the £9bn Lower Thames Crossing, according to sources.
- Chancellor Rachel Reeves is contemplating a model offering returns to investors who bankroll the road project’s construction.
- The proposed financial structure resembles the now-defunct PFI model but aims to avoid past challenges.
- The government has not fully reversed PFI but is exploring ways to align with private investors for infrastructure.
- A decision on the project’s future is pending, tied to upcoming elections and spending reviews.
The UK government, as reported, is considering employing a private finance scheme to facilitate the funding of the ambitious £9bn Lower Thames Crossing project. The Financial Times has revealed that Chancellor Rachel Reeves is inclined towards a scheme where investors would benefit financially from their investment in the road’s construction. Notably, these contracts could either be indefinite or extend over 125 years.
The suggested financial approach for the Lower Thames Crossing mirrors a new version of the private finance initiative (PFI), a mechanism previously discarded by the UK government in 2018. This initiative was halted due to concerns over value for money and issues arising from the collapse of construction giant Carillion. However, the proposed model echoes the regulated asset base (RAB) model, already in use for the Thames Tideway project and set for nuclear power financing under recent legislation. This model, in practice, compensates private investors through increased utility charges, potentially manifesting as higher toll rates for the road users.
Historically, PFI saw its inception in the mid-1990s, being expansively utilised for developing roads, hospitals, and schools, among other infrastructure. Initially, private entities shouldered the upfront project costs, subsequently recouping their investments over time through public sector lease agreements. Despite its abolition in recent years, over 550 PFI contracts remain active, illustrating its past extensive use and substantial financial implications.
Derek Sharkey of WSP underscores the persistent role of public-private collaborations within UK infrastructure, even as traditional PFI methods wane. He indicates that modern mechanisms afford the public sector efficiencies, particularly by transferring significant responsibilities and risks to the private counterparts during the operational phases of such extensive projects.
While the current administration maintains the cessation of PFI in its conventional form, it remains committed to engaging private sector investment. The decision concerning the Lower Thames Crossing’s future awaits the outcomes of the upcoming General Election and further scrutiny under the government’s spending review. Transport Secretary Louise Haigh has flagged existing public expenditure gaps and is advocating for a foundational reassessment of capital project strategies.
The Lower Thames Crossing’s financing remains uncertain, pending political and fiscal evaluations.
