BusinessCompany NewsFDs slam PFI deals as work increases

FDs slam PFI deals as work increases

As the accountancy firms reap ever-bigger rewards from the private finance initiative, FDs are not convinced that PFI deals offer better value compared with traditional public sector financing.

Link: Brown defends spending on PFI schemes

This week’s Accountancy Age/Reed Accountancy Big Question found that 37% of those surveyed believed PFI was no better value than traditional finance, compared with 28% who did. Around 35% of FDs were neutral.

The findings come as the big accountancy firms report rapid growth in public project finance work. PwC has said that advisory work for public sector projects is growing at a rate of 40% a year, while audit work in the area is growing at 20%.

While PFI has traditionally been a domain of the Big Four, last week Grant Thornton revealed it planned to double its PFI and PPP-related project work during the next three years.

Chris Burhop, FD at Somerset textile manufacturer BFF Nonwovens, said: ‘PFI simply passes the finance risks associated with the project from the government to the private sector firm. For that, the firm and their financiers will want a risk premium or, alternatively, they collectively under-value their bid for the job in order to demonstrate short-term contractual wins, while ignoring long-term contractual risk. In either event, it cannot be good for the taxpayer.’

He added that the government can access cheaper finance than the private sector by issuing gilts, so it doesn’t have to worry about a risk premium.

A common view expressed was that certain projects could be better suited to PFI than others. One FD said: ‘It depends on each project. However, without its deferred payment regimes it would be more difficult to finance so many major projects.’

Big accountancy firms are quick to deflect criticism on PFI. E&Y has claimed that PFI is 15% better value compared with traditional procurement.

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