Jurisdiction(s):
United Kingdom

Key definition

PFI definition

What does PFI mean? PFI (private finance initiative) describes, in practice, a long‑term public–private partnership under which a private sector special purpose vehicle (SPV) finances and operates, and usually designs and constructs, public sector assets or services. The public authority pays a performance‑linked unitary charge over the term. PFI is not a statutory definition but a policy and market label; the legal framework is found in the project agreement and related documents, HM Treasury guidance (including SoPC4), and public procurement law. Key features include limited‑recourse project finance, transfer of design, construction, lifecycle and maintenance risk to the private sector, availability‑based payment and deductions,...

UK PFI/PF2 Projects: Key Project, Construction, FM and ICT Contracts; Equity, Debt and Bond Financing; Security, Warranties and Step-in Rights

Published by a LexisNexis Construction expert

Practice notes

Project documents

This Practice Note offers an overview of several widely used agreements and papers in a pfi/pf2 scheme, though the precise suite adopted will turn on the particular project. In the 2018 Budget (delivered on 29 October 2018), the government stated that PF2 will not be used for new schemes (see News Analysis: Budget 2018—what does it mean for infrastructure and housebuilding?). That said, existing PFI and PF2 arrangements will remain in operation and, given the usual term of such projects, are expected to continue for many years...

project agreement

This is the core contract in any PFI arrangement. It records the full set of terms and conditions governing the relationship between the authority and Project Co/SPV for the life of the project. Where Project Co/SPV is granted a concession (ie the exclusive right to supply/operate/exploit something to create third party revenue), the Project Agreement may be described as a concession agreement. Typically a substantial document, it is often divided into multiple sections for manageability. Under the PFI regime, the Project Agreement is highly standardised, with guidance on how PFI projects should be approached, as well...

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Web page updated on 22/05/2026

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