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Private Finance Initiative and UK’s Construction Industry - Essay Example
Author : yundtelaina
Pages 6 (1506 words)
This paper recommends that a minimum value be set for risk costing and not eliminating it. This move will eliminate the question of economic recession because construction firms still have big opportunities in the state that this paper is recommending…
Private Finance Initiative (PFI) is a device employed by United Kingdom’s government to arguably to make the construction industry more competitive and more profitable. This does not come as a surprise since the UK construction industry provides a tenth of the UK's gross domestic product, employs 1.4 million people and is worth around £65 billion per annum. With an output of £81.9bn in 2006, the UK construction industry is ranked in the global top ten. Thus, it is only then logical to support the industry.
PFI is a way of funding major new public building projects such as hospitals, schools, prisons and roads. Private consortiums, usually involving large construction firms, are contracted to both design and build a new project, and also to manage it. The contracts typically last for 30 years. The building is not publicly owned but leased by a public authority, such as a council or health trust, from the private consortium. The private consortium raises the cash to build the project. It is then paid back with interest by the government through regular payments over the period of the contract. PFI projects could be viewed as a means of enabling government services to be "outsourced" to private sector suppliers. PFI is not the same as privatization as the Government retains ultimate responsibility to the public for the service concerned. Outside the UK, PFI is more commonly known as Public Private Partnerships (PPP).
The policy has not been without its critics. As with any form of hire purchase, buying something on tick is more expensive than paying for it up front. The Edinburgh Royal Infirmary is often cited as an example of how expensive the PFI can be. It cost £180m to build and will cost £900m to pay for. ...