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,...

PFI/PF2 project structures: parties, roles and interfaces in the UK

Published by a LexisNexis Construction expert

Practice notes

This Practice Note explores the principal parties commonly engaged in a pfi or pf2 project. It outlines the functions of public sector participants, private sector counterparts, finance providers and sub-contractors, together with support providers and other professionals involved. In the 2018 Budget (delivered on 29 October 2018), the government confirmed it would cease using PF2 for new schemes (see News Analysis: Budget 2018—what does it mean for infrastructure and housebuilding?). Nonetheless, live PFI and PF2 arrangements remain in operation and, given the usual duration and lifespan of these schemes, are expected to do so for many years to come.

Public Sector Authority/Trust

This is the public sector organisation that originates and procures the PFI scheme in question and seeks to have the asset constructed and properly maintained (the label 'Trust' applies only to NHS schemes). The public body will typically be a local authority (including fire and rescue and (formerly) police authorities), an NHS Trust or a government department or non-departmental public body. The Authority/Trust enters into a long-term contract, called the Project Agreement, which will generally run for 25 to 30 years in total...

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Web page updated on 21/05/2026

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