PPP Wealth Machine: UK and Global trends in trading project ownership

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A UK PPP Equity Database and a full report on Public Private Partnership is now launched. 

High profits and annual returns

The average annual return on the sale of equity in UK PPP project companies was 29% between 1998-2012 – twice the 12%-15% rate of return in PPP business cases at financial close of projects.

Twelve PPP projects had an annual rate of return of over 100% and another 25 had an annual rate of return of between 50%-100%. PPP profits remain unregulated with no profit sharing with the public sector. The excess profit could be £2.65bn, all of which benefits private sector companies.

Unprecedented scale

Equity in 716 PFI/PPP projects (includes multiple transactions in some projects) has been sold in 281 UK transactions worth £5.6bn since 1998. Health and Education PPP projects account for over 60% PPP equity sales between 1998-2012.

Why ownership and control matter

The sale of PPP equity provides new opportunities for profiteering, can invalidate value for money, increases offshore tax avoidance, erodes democratic accountability, increases secrecy and trading of publicly financed assets with significant negative consequences for the future of public services and the welfare state.

Growing power of offshore infrastructure funds

Offshore infrastructure funds now account for over 75.0% of PPP equity transactions. They have grown rapidly, building portfolios of public assets with equity in 315 UK PPP projects. Five funds have 50%-100% equity ownership of 115 projects. Tax avoidance by infrastructure funds results in a significant annual loss of tax revenue.

Global transactions

The sale of PPP equity is increasing in the rest of Europe, Canada, Latin America, Australia and Asia with 146 equity transactions valued at US$103bn involving 297 PPP projects. Toll roads and highway projects account for three-quarters of projects.

Dexter Whitfield, Director of ESSU stated:

“Private Finance 2 (PF2) is essentially a rebranding of PFI. It does nothing to address the profiteering from the sale of equity in current PFI projects. Public sector minority equity stakes in future PF2 projects is likely to have a marginal effect on windfall gains and entraps local authorities, the NHS and other public sector organisations in playing the secondary market. The measures to increase public disclosure are meagre and likely to be ineffective.”

The ESSU PPP spreadsheet and a copy of the report can be downloaded from http://www.european-services-strategy.org.uk/ppp-database/

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Dexter Whitfield is the Director of the European Services Strategy Unit and Adjunct Associate Professor, Australian Workplace Innovation and Social Research Centre, University of Adelaide.