Glossary Glossary 2026-06-30
What is PFI?
PFI (Private Finance Initiative) is a long-term form of public-private partnership (PPP) used in the UK to deliver and manage public infrastructure such as hospitals, schools, training centres and government buildings.
Under a PFI contract, a private sector consortium is responsible for designing, building, financing and operating an asset over a period typically lasting 25 to 30 years. In return, the public sector pays an annual, performance-linked fee for the use and maintenance of the asset.
How does a PFI contract work?
A typical PFI arrangement includes:
- Design, build and financeThe private sector funds and constructs the building or infrastructure.
- Operate and maintainFacilities management services — such as maintenance, cleaning and security — are delivered over the full contract lifecycle.
- Performance-based paymentsThe public sector makes payments (often called a unitary charge) based on service performance and asset availability.
- Risk transferCertain risks, such as construction and maintenance, are transferred to the private sector under agreed contractual terms.
These contracts are typically managed through a dedicated company known as a Special Purpose Vehicle (SPV), which oversees delivery and financial arrangements.
Why were PFIs used?
PFI became widely used across the UK from the late 1990s to deliver major public infrastructure programmes.
They were designed to:
- enable upfront investment without immediate public sector capital spend
- transfer delivery and operational risk to the private sector
- provide long-term certainty on asset performance and costs
PFI has been used across sectors including healthcare, education, defence and policing estates.
What happens when a PFI contract ends?
PFI contracts are now reaching expiry across the UK, creating a significant shift in how estates are managed.
At the end of a contract:
- Assets return to the public sector
- Service contracts are restructured or re-procured
- Workforce and operational responsibilities may transfer
- New delivery models are defined for the future
This process is often referred to as PFI expiry or handback, and it requires careful planning to ensure continuity of service, compliance and long-term asset performance.
Why PFI still matters today
While new PFI schemes are no longer widely used, hundreds of existing contracts are due to expire over the next decade, making PFI a key consideration for public sector organisations managing complex estates.
For many organisations, this moment represents more than a contractual milestone. It is an opportunity to:
- reassess asset condition and lifecycle investment needs
- redefine service delivery models
- improve flexibility, performance and value for money
In summary
PFI has played a major role in delivering and maintaining UK public infrastructure. As these long-term contracts come to an end, organisations are moving from fixed, contractual models to more flexible, performance-driven approaches to managing their estates.
Frequently asked questions
PFI stands for Private Finance Initiative, a form of public-private partnership used to fund and manage public infrastructure projects over the long term.
Most PFI contracts run for 25 to 30 years, covering the full lifecycle of design, construction, maintenance and operation.
PFI contracts typically include facilities management services such as maintenance, cleaning, security and other operational services, delivered under a single agreement.
PFI contracts are usually managed by a private sector consortium through a Special Purpose Vehicle (SPV), which is responsible for delivering the services and managing the financial structure.
PFIs were introduced to enable investment in public infrastructure without upfront capital spending, while transferring certain risks to the private sector.
New PFI schemes are no longer widely used, but many existing contracts are still active and approaching expiry, making them a key focus for public sector organisations today.