Balfour Beatty turns a huge profit on building schools and hospitals

 

Deputy business editor

Children in Knowsley, near Liverpool, may be enjoying newer school buildings thanks to Gordon Brown’s public private partnership (PPP) scheme, but that is nothing to the pleasure of the contractor that built them.

Balfour Beatty, which won the area’s Building Schools for the Future programme for a £19m equity investment in 2007, has just sold its stake for £42m. It sold up, even though the project to build and run the seven sites had barely started its 25-year life.

The company said yesterday the price had been even higher than managers had expected. The deal is likely to raise again the argument that public projects were awarded to the private sector too cheaply.

It was not only the schools in Merseyside that turned a huge profit for Balfour Beatty. It also yesterday flipped its half of a PPP project to design, build and operate the University Hospital of North Durham. That profit did not come so quickly – the original 30-year contract was signed in 1998 and was one of the first hospitals to be built under the PPP model.

North Durham has proved highly controversial in its early years, particularly over the issue of bed shortages and redundancies. But Balfour Beatty has managed to sell its 50 per cent stake for £55m. While the company did not break down the profit, it said that, combined, the schools and hospitals sold yesterday “exceed the directors’ valuations by £44m, representing an uplift of 82 per cent”.

PPPs, though started by the Conservatives, were eagerly taken up by the Labour government, which saw them as a way to get major public infrastructure built without the cost going on the public balance sheet.

However, the big profits involved have sparked controversy. And that is set to increase as a burgeoning “secondary” market has erupted of investors keen to buy up projects in their early stages. They are attractive because of the decades of reliable income the contracts provide.

Because of the lack of new infrastructure projects in recent years, these funds are chasing ever fewer schemes to buy, and are therefore boosting prices. In Balfour Beatty’s case, it was funds managed by Dalmore Capital that was the buyer.

Balfour has made huge profits in the past two years selling hospitals and schools. Kier and Interserve, two other major players, have done the same.

Dexter Whitfield, of the European Services Strategy Unit think tank, has claimed: “The Treasury conceded there have been excessive profits and windfall gains on secondary market sales, yet did absolutely nothing to change this situation for over 700 existing PFI projects.”

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Laura Trott with her gold
Commonwealth Games
Arts and Entertainment
Gal Gadot as Wonder Woman
film
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
Extras
indybestSpice up your knife with our selection of delicious toppings
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Training/Learning and Development Coordinator -London

£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

.NET Software Developer (.NET, C#, ASP.NET, front-end)

£30000 - £45000 per annum: Harrington Starr: A Global Financial Service Organi...

C# Web developer (C#,MVC,ASP.NET,SQL)

£30000 - £40000 per annum + Bonus+Benefits+Package: Harrington Starr: C# Web d...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried