Privately funded infrastructure in the UK: Participants' risk in the Skye Bridge project

Abstract

This paper examines the risk implications of the use of private funding for the Skye Bridge concessionary infrastructure project. The privatisation of infrastructure procurement in the UK arises as a result of the Government's consultation paper ‘New roads by new means — bringing in private finance’ (Department of Transport (DoT), 1989) together with relaxation of the use of private finance, the so-called Ryrie rules. The analysis of the Skye Bridge project looks at the financing arrangements and the resultant risk and reward for the participants to the concession. The general conclusions are: 1. 1 private sector finance could be hard to mobilise to due to the perceived levels of risk and uncertainty; 2. 2 in the case of the Skye Bridge, allowing full inflation adjustment of the toll charge may provide considerable potential windfall gains to the concessionaire; 3. 3 only projects offering the highest return are likely to attract potential interest.