10. How much impact has the financial crisis had on launching new Private Finance projects? Is the crisis likely to have a permanent effect on the Private Finance market?
10.1 The effect of the current financial crisis is that the cost of borrowing has most likely increased permanently and is at least unlikely to decrease over the next three to four years. However, there is not a significant problem for the LIFT market in terms of accessing capital, although the cost of capital has increased and more conditions are now applied. It is worth noting, however, that no projects have yet failed because of lack of finance, but this is not to say this cannot happen, although it is unlikely in the case of LIFT projects which are around the £7 million mark on average. Had public capital been used, the same issues would still apply, though this would contribute to both the increasing public debt and impact upon the UK's credit rating. The impact of all this is that the costs of schemes will inevitably rise as a direct result of the increased cost of capital, but again this will apply to public capital projects as well.