European Services Strategy Unit: Research Report No. 8
| The financial The growth of offshore PFI/PPP Dexter Whitfield |
New research reveals the rapid growth and power of offshore secondary market infrastructure funds in a £17.1bn (€20.1bn) industry, in effect buying and selling hospitals, health centres, schools, colleges, and roads like financial commodities.
• The sale of 33 secondary market infrastructure funds 2003 - 2016 involved the purchase of equity in 1,151 PFI/PPP project companies (includes multiple transactions in some projects) at a cost of £8.1bn (€9.5bn).
• In addition, equity in 980 PFI/PPP project companies (SPVs) has been sold in individual or small bundle transactions since 1998 at a cost of £9bn (€10.6bn).
• The total value of PFI/PPP equity transactions reached £17.1bn (€20.1bn) by mid 2016, a 42.5% increase in less than four years.
• The average annual rate of return on the sale of individual/small bundles was 28% (based on 110 transactions involving 277 PFI/PPP projects between 1998-2016).
• The three-way profit gain - original SPV shareholders, secondary market fund sales and shareholder dividends of secondary market funds - means the total annual rate of return could be between 45%-60% - three to five times the rate of return in PFI/PPP final business cases.
• The five largest listed offshore infrastructure funds made a total profit of £1.8bn (€2.1bn) in the five-period 2011-2015 but paid ZERO tax.
• Twelve offshore infrastructure funds have equity in 74% of the 735 current UK PFI/PPP projects.
• Equity in Edinburgh Schools PPP1 project was sold 13 times between 2003-2014.
• New guides to The Statistical Treatment of PPPs in Europe (Eurostat, EPEC and EIB, 2016) and the World Bank's Benchmarking PPP Procurement 2017 make no reference to PFI/PPP profiteering from the sale of SPV equity or to offshoring. It demonstrates a biased, self-serving and politically selective approach to statistics and procurement designed to aid the PPP industry and evade key matters of public interest.
The report recommends new controls to restrict offshoring public assets, termination of the PFI/PPP programme, nationalisation of SPVs, increased public investment and radical public management. Published October 2016.
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