Privately-Financed Roads in Britain: A Policy Assessment

For many years the UK government has sought to move activities from the public to the private sector; government’s role evolving from being a provider to being a procurer of social infrastructure and related public services. This policy gained considerable momentum in the early 1990s through the Private Finance Initiative (PFI) – introduced under a Conservative administration but subsequently embraced by New Labour. The PFI departed from earlier policy initiatives developed to harness the skills and experience of private enterprise insofar as it involved the use of private, at-risk capital.

Fifteen years on, my PhD thesis looks at the legacy of the PFI by examining its application in the roads sector. The PFI is widely discussed in the literature however such discussions are often descriptive, conceptual or ideological. This thesis assesses the performance of PFI roads by examining the evidence.

The research findings reported are set in the context of the policy imperative that led to the development of the PFI: the need to modernise an infrastructure estate that had suffered years of neglect while, at the same time, demonstrating fiscally prudent governance. Four new streams of research are reported exploring project risk – in the form of construction and then traffic risk – and examining the ex ante economic and ex post financial performance of PFI roads. A mix of data and analytical methods are used including literature reviews, internet-based questionnaires, semi-structured interviews, and statistical and accounting analysis.

Key conclusions from the research include the fact that the private sector cost of capital for the early PFI roads was around three percentage points higher than the cost of Exchequer finance – lower than previously reported. This financing differential has subsequently narrowed further, but has been more than offset by a reduction in the Treasury’s discount rate from 6% to 3.5%; raising the efficiency hurdle for privately financed roads today. Turning to policy, PFI roads have secured fixed price on asset delivery and on-time completion, and there is evidence of successful whole life cost risk transfer. As a portfolio, the Highways Agencys’ PFI roads programme continues to demonstrate value for money when tested against the lower discount rate or reduced optimism bias uplifts. In terms of benefits, this suggests that the original policy of exposing the roads sector to commercial disciplines was more robust than some of the literature has suggested. Recommendations are made for exploiting these commercial disciplines further.


Friday, 17 August 2007


Academic Qualifications

PhD, Institute for Transport Studies, University of Leeds, 2008.
Post-Graduate Diploma, Traffic Engineering, Middlesex University, London, 1994.
MSc, Business and Economic Forecasting, Kingston University, London, 1992.
MSc, Transport Planning & Management, University of Westminster, London, 1989.

Professional Qualifications

Chartered Civil Engineer


Robert Bain Traffic & Transportation (2007 to date)

Self-employed consultant providing technical support to institutional investors, monoline insurers, infrastructure funds and procuring agencies. In addition, retained on a part-time, freelance basis by Standard & Poor's consulting division (Risk Solutions) to deliver project finance training and credit rating model support services.

Director, Standard & Poor’s (2002–2007)

Director and transportation sector co-ordinator in the agency’s Infrastructure Finance Ratings practice. Responsible for credit analysis, ratings and surveillance in the road, rail, airport and bus sectors – covering corporate and structured finance (mainly project finance transactions and securitisations). Additional responsibility for transport and construction-related credit risk research, and credit risk training (internal and external courses).

Associate Director, Steer Davies Gleave (1988–2001)

Traffic and transportation consultant with international experience from Europe, Latin America and Asia. Specialised in transportation demand modelling (particularly traffic and revenue studies for privately-financed toll roads). Office manager of the company’s full-service Caribbean office in Puerto Rico for six years (1995-2001).

Professional Memberships

Fellow, Institution of Civil Engineers
Fellow, Institution of Highways & Transportation
Fellow, Chartered Institute of Logistics & Transport
Member, Institute of Credit Management

Research Interests

Transport demand modelling
Credit risk analysis & modelling
Project risk analysis

Post-Graduate Lecturing Experience

University of Westminster, London (guest lecturer)
Imperial College, London (guest lecturer)
Loughborough University (guest lecturer)
Institute for Transport Studies, University of Leeds (guest lecturer)
University of the West of England (guest lecturer)
University of Southampton (guest lecturer)
University of Puerto Rico (guest lecturer)
North Eastern University, Boston (guest lecturer)
Massachusetts Institute of Technology, Cambridge (guest lecturer)

Transport Economics Course, ENIT, Cairo (supervisor & lecturer)
Transport Economics Course, PTRC, London (joint-supervisor & lecturer)
Transport Investment Appraisal Course, PTRC, Sofia (joint-supervisor & lecturer)