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PFI back on the agenda, says IUK chief

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Infrastructure UK chief executive Geoffrey Spence has said the government could take an ‘increased interest’ in private finance initiative (PFI) schemes as it targets a budget surplus

Speaking at an economic panel at the Construction News Summit chaired by broadcaster Andrew Neil, Spence said PFI could work ‘if the numbers are right’.

‘The first round of major PFI schemes finished a few years ago, and during the past few years there’s been some fiscal consolidation and a lack of willingness and ability to enter into long-term arrangements – the numbers didn’t support PFI,’ he said.

‘But now, given the constraint on capital budgets, we could see an increased interest in PFI, if the numbers are right.’

Spence later told the AJ’s sister title Construction News that no formal decision had been taken within Whitehall to increase PF2 schemes, but said the message of the last four years encouraging investors to look at energy schemes rather than PFIs could change in the coming years.

Full interview

Read the full interview with Geoffrey Spence, exclusive video interviews and write-ups on panels in education, residential, local government, infrastructure and more over the coming days on www.cnplus.co.uk

The panel also questioned figures from the Office for National Statistics that suggested construction saw a decline in output during July and August this year.

Asked by Neil whether they believed the ONS figures were accurate, the economists agreed the outlook for construction was strong and cast doubt on suggestions the industry has shown signs of a significant slowdown.

Bloomberg UK economist Dan Hanson said the figures ‘underestimated the extent of activity in the industry’, adding that construction will continue to make “a decent contribution to overall growth relative to its size”.

The most recent ONS data suggested construction output fell 2.2 per cent in Q3 2015 – the first quarter-on-quarter decline since Q1 2013.

Lloyds Bank chief economist Trevor Williams said that, although he was not sure whether the data would be revised, construction was ‘unequivocally in a growth phase’.

‘This is not a decline in construction,’ he said. ‘If you look at the industry in the context of population growth, the demand for infrastructure and housing is just too great.’

Williams cited the latest Markit/CIPS PMI data, which showed construction activity increasing, as evidence the industry was still performing strongly year on year.

“I don’t think this is about a decline in construction activity; it’s about the change in construction and the pace of its growth,” he added.

However, CBI director for business environment Rhian Kelly warned the industry ‘absolutely’ had to address skills shortages if construction was to seize the opportunities ahead.

‘We need to ensure people can bring in the right skills, as we might not necessarily get those skills from the UK in the short and medium term,’ she said.

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