Private Financing of Transport Infrastructure: Some Uk Experience

This paper establishes a framework for considering the use of private finance in the development of transport infrastructure and applies it to examples drawn from United Kingdom experiences. The framework highlights the key issues of risk (and especially risk transference) and transactions costs in determining the effectiveness of different private finance options. The examples used range from the totally private provision of the Channel Tunnel, through the privatisation of Railtrack to the use of DBFO schemes for major roads. The key conclusion is that the expected gains from increasing transparency in transactions costs have been difficult to achieve and that this is at least in part due to a reluctance by the private sector to accept the transfer of risk. It will require much greater confidence in identifying private sector benefits from transport projects and reducing the risk of change in government policies to make a fuller engagement of the private sector effective.