FUNDING PUBLIC TRANSPORT INFRASTRUCTURE IN THE UK: PRIVATE FINANCE AND RISK TRANSFER

For much of the post-war period, transport infrastructure projects were funded entirely by government, with the development, design, construction, operating and revenue risks of the project borne entirely by the public sector and ultimately the tax payer. Over the last 10-15 years there has been a progressive shift in the UK to maximise the involvement of the private sector in delivering and financing transport infrastructure projects. At the same time, the public sector has sought to transfer risk away from the public sector to private sector developers, construction companies and concession operators. The purpose of this paper is to examine the principal mechanisms that have been used to fund transport infrastructure projects in the UK, and how risk transfer is central to all aspects of project financing, delivery and operation. The paper will draw principally upon the development experience of light rapid transit (LRT) schemes in the UK over the last 10-15 years. However, one of the conclusions of the paper is that although great strides have been made over the last ten years to transfer risk from the public to the private sector, the public sector will always remain the bearer of the ultimate risk of project failure, especially with flagship projects. (a) For the covering entry of this conference, please see ITRD E200461.