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Is private finance returning to UK infrastructure? What the public sector needs to know

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Blog
Summary

By Alun Williams

The 2018 abolition of the Private Finance Initiative (PFI) and its successor, PF2, marked a significant shift in UK infrastructure policy. Citing concerns over value for money and inflexibility, the move seemed to close the book on a notable chapter of public-private collaboration. Yet, nearly seven years on, are we witnessing a quiet resurgence, albeit under new names and structures? 

For public procurement professionals and veterans of PFI and other Public-Private Partnerships (PPPs), the landscape warrants close observation.

The fundamental drivers that led to PFI have not entirely vanished. The UK faces substantial infrastructure needs – from achieving Net Zero targets and upgrading transport networks to modernising public services. Simultaneously, public finances remain constrained. This enduring challenge – the need for significant investment coupled with limited public capital – inevitably invites a reconsideration of alternative financing and delivery models that leverage private sector capital, expertise, and risk management.

What might a new generation of public-private partnership look like, and what is required from the public sector to achieve successful outcomes?

Emerging private finance models in UK infrastructure

While the 'PFI' brand may remain tainted for some, the core principles of engaging private finance for long-term infrastructure provision seem to be enduring and evolving, rather than disappearing. We are seeing nascent examples emerge:
 

The Welsh Mutual Investment Model (MIM)

Developed by the Welsh Government after 2018, MIM explicitly aims to deliver infrastructure projects by drawing on private finance, but with modified risk-sharing and a greater emphasis on partnership and public interest. Tangible examples include:

  •  A £119m Design, Build, Finance, and Maintain (DBFM) scheme to deliver two brand new, state-of-the-art campuses for Cardiff and Vale College
  • The £590 million dualling of the A465 Heads of the Valleys trunk road, which is due to be completed this summer and enter Operation & Maintenance for 30 years

This is an example of a UK devolved administration actively pursuing a bespoke PPP-style revenue-funded, off-balance-sheet model for infrastructure investment tailored to its priorities.

Lower Thames Crossing – Major project funding debates 

The sheer scale of projects like the c.£10 billion Lower Thames Crossing necessitates an exploration of diverse funding avenues. While no final decision has been made, discussions have included models drawing from PPP principles or a Regulated Asset Base (RAB) structure, a form of incentivised private financing. This example shows that, even if heavily modified, the door to private finance structures remains open for consideration for mega-projects.

Silvertown Tunnel – Transport for London (TfL) and user charging

TfL's approach to the Silvertown Tunnel project incorporates a Design, Build, Finance, Operate (DBFO) model. Crucially, its funding relies significantly on road user charging (tolling) once operational. While distinct from traditional PFI models, this approach transfers significant demand risk and relies on long-term private operational management financed against a future revenue stream – core tenets familiar to anyone versed in PFI/PPP models.

 

The critical role of commercial and procurement acumen

These examples underscore that, regardless of the label – MIM, DBFO, potential RAB, or future bespoke models – sophisticated commercial and procurement expertise remain crucial. The lessons learned from PFI, both positive and negative, must guide the design and management of these new structures.

To successfully navigate this evolving landscape, the public sector must focus on:

  • Robust procurement strategies: Defining clear outcomes, structuring procurements to attract the right partners, and ensuring genuine competition.
     
  • Intelligent risk allocation: Moving beyond simply transferring maximum risk to instead achieving an optimal, sustainable balance between the public and private sectors.
     
  • Sophisticated negotiation: Securing terms that deliver genuine long-term value for money and protect the public interest.
     
  • Effective contract management: Proactively managing long-term contracts and supplier relationships to ensure ongoing performance and adaptability.

As the public sector re-engages with complex private finance structures – albeit reformed ones – it must ensure the right commercial skills are embedded from start to finish. Public sector teams must build expertise in both public and private sector procurement, focusing on driving value, managing suppliers, and structuring resilient commercial arrangements. This will be crucial to avoiding past pitfalls and delivering successful infrastructure outcomes.

Navigating the evolving private finance landscape

While the formal PFI/PF2 era is over, the need for innovative funding and delivery solutions for UK infrastructure persists. Emerging models suggest that private finance, in adapted forms, will continue to play a role. For civil servants and infrastructure experts, the challenge lies in structuring these future partnerships effectively, armed with the lessons of the past and equipped with robust commercial and procurement discipline. The ghost of PFI may not be returning wholesale, but the principles of leveraging private capital and expertise are certainly finding new avenues – requiring careful navigation and sharp commercial focus.