Crunch puts M25 revamp in jeopardy
Last weekend I was reporting that the head of Partnerships BC Larry Blain was “comfortable” with the prospects of raising private sector funds for the SFPR and the PM2/H1 projects. He shouldn’t be.
The Observer (The Guardian’s Sunday paper) reveals that a similar scheme to the PM2/H1 is proving difficult to finance. The M25 is the ring road around outer London. The day war broke out, in 1939, was the day that sprawl was stopped in London. There was too much of immediate need to deal with, so London stopped spreading out and the planners took the opportunity to draw a line to stop London coalescing with any more of the towns on its fringe. It was called The Green Belt – and is much bigger than anything that uses that name here. Development of course restarted after the war, and just leap-frogged over the Green Belt. But other powers ensured that “ribbon development” along the major roads was also stopped, and new towns (“complete communities” in the words of the LRSP) were established.
The Green Belt became the only possible route for one of a series of motorways proposed to ring around London. The other, inner rings were never completed because they went through established areas where protests were loud and effective. But the M25 was not big enough almost from day 1. People drove out of London, drove along it and then re-entered from another angle – routes which looked like slices of a pie when mapped. Grotesquely indirect, but with the bonus of a few miles of speed. Over time the M25 has been widened, and every time the traffic just gets worse, not better. The futility of road building to cure congestion has no better model in my experience. But as usual, the traffic engineers and politicians think that the next time will be different.
Britain’s most expensive road improvement programme, the £5bn upgrade of the M25, is struggling to raise finance as a gathering cash crisis threatens the government’s controversial £44bn private finance initiative (PFI).
The reluctance of banks to lend money is sparking delays in the delivery of new schools, hospitals, roads and other key facilities.
A ‘funding competition’ to pay for the M25 upgrade and widening, scheduled to begin next April and to be completed before the London 2012 Olympics, is in danger of failing to attract backers. Delays could mean improvements are not ready in time for the London games.
Bizarre really. £5bn is being sought for a project which will almost certainly not work but is thought to be needed for a few weeks of a sports festival. The Brits are as blinded by Olympic bling as we are. It seems to me that if it cannot be financed that may well turn out to be a Good Thing. £5bn would buy a lot of public transport – the only thing known to cure traffic congestion when combined with road user pricing.
‘The current state of chaos in the market is definitely having an impact on the PFI market,’ said Richard Tierney, corporate finance partner at BDO Stoy Hayward. ‘Firstly, the problems in the banks mean that PFI project funders are now restricting the amount they will lend on individual projects.
‘There is an increasing tendency for banks to club together to fund even quite small projects which is delaying some projects. The problem is even more acute on bigger projects such as waste PFI schemes. And banks are now charging higher rates of interest on PFI deals. The credit crunch could become a real issue for PFI projects.’
Britain’s PFI is fishing in the same pond as Partnerships BC. I think Larry Blain is either misinformed or overly optimistic. At the very least the current mood in the market means that current timetables will NOT be achieved, and I will be very surprised if anyone from the private sector will be willing to sign anything until they can see how to raise the funds. Becuase right now – despite every G8 government pumping in funds as fast as they can, banks are not lending. That is what term “credit crunch” means. Not higher interest rates or more difficulty putting together funding packages. Just no money until … well until the banks start to believe they may have a chance of getting it back, and not just swallowed up in the current mess