A college campus funded by a PFI deal will have cost four times the build price when the deal ends, FE Week can reveal.
Newbury College is thought to be one of only a few English colleges to have set up a private finance initiative, which it used for a £10 million campus that opened in 2002.
Under terms agreed at the outset, it will have repaid £40.5 million when the contract ends after 25 years in July next year.
In response to a freedom of information request, the West Berkshire college said annual PFI costs were between £1.2 million and £1.5 million for the first 15 years of the deal.
But since 2018 the annual charge has increased – hitting a peak of £2.5 million last July.
The costs include debt repayment for the construction project, interest, “lifecycle” payments for major building upkeep, and other bills such as maintenance, cleaning and security.
Last year the Department for Education placed the college in intervention due to its “fragile” financial position. Ministers also approved a £1.5 million emergency loan in December. Newbury is one of the country’s smallest colleges with an annual income of £15 million.
Assessments of the its financial problems pointed to “very high” PFI repayments, delayed payments from a 2023 land sale, and missed new learner targets in 2024-25.
The FE Commissioner’s decision on whether Newbury should merge with another college is due this summer.
Newbury has agreed around 130 PFI contract “variations” since 2002, altering terms that include what can be taught in classrooms and the exact days or hours buildings are accessible.
In the five-year run up to the college taking full control of the campus, it has faced separate costs of about £1 million for hiring in-house facilities managers, building surveys and external legal advice.
Value for money?
Estimates suggest PFI costs the public purse up to 40 per cent more than government-funded projects.
However, the Labour government is again considering using private capital to fund new projects “where value for money for taxpayers can be secured”.
Spencer van der Werf, managing director of facilities adviser Help for Schools, said Newbury’s charges appeared to be “within the normal range” of similar PFI deals and costs would have been made clear to management at the outset.
He explained PFI charges become unaffordable for a range of reasons, including energy costs going “through the roof”, reductions in government funding, and “poor management”.
However, the government has never paid Newbury College additional grant funding to meet PFI costs, known as “credits”, while some schools and local authorities have received support.
College minutes from 2023 show management was frustrated with facilities management contractor Mitie’s “unacceptable” service around security, landscaping and cleaning. These concerns are understood to have been resolved.
Newbury’s PFI contract was among early “pathfinder” deals launched under New Labour, funding its move to a new campus on the edge of the town.
Originally, the private finance partner was London & Regional, founded by billionaire property developer brothers Ian and Richard Livingstone.
Since 2014, the PFI contract has been owned by Equitix, which is part of global investment firm Tetragon Financial Group.
The final stages
Lee Probert, Newbury College’s principal since January 2025, said: “Visitors to our campus can immediately see the benefits that the PFI has enabled through the exceptional standard of our facilities.
“Alongside this, significant growth in student numbers in recent years and the implementation of an effective balanced budget, the college is entering the final stages of the PFI from a position of financial security and confidence.
“Our focus remains on delivering ‘careers, not courses’, providing excellent teaching and skills development for our students and communities, and ensuring a sustainable future for Newbury College.”
An Equitix spokesperson said: “It is acknowledged by all project parties that the Newbury College PFI has delivered facilities of an exceptional standard with unitary charge payments as were envisaged at the outset of the contract.
“We continue to be focused on ongoing service delivery and on working collaboratively to ensure the facility will be handed back in the required condition in 2027.”
A Mitie spokesperson said: “We are committed to providing the highest standard of services across our contracts.
“These minutes are from 2023, and since then we have continued to work with the College to strengthen service delivery.”
The DfE told FE Week it does not collect information on which colleges have PFI contracts and that its private finance team was providing “some direct assistance” to Newbury College.
Your thoughts