Bruised builder Jarvis pulls out of PFI

6th August 2004 at 01:00
One of the leading companies involved in the controversial private finance initiative is pulling out of school building work as it struggles to avoid bankruptcy.

Jarvis will employ outside contractors for any new contracts after accumulating a huge pound;230 million debt, partly as a result of cost over-runs on school projects in the North-west.

The company, which was at the centre of investigations into the Potters Bar rail crash, is involved in 19 PFI deals covering more than 120 schools.

Jarvis has faced strong criticism from teachers and parents after delays to building work in Kirklees, West Yorkshire and the Wirral, Merseyside.

Banks have agreed to give the firm, chaired by Stephen Norris, the twice-failed Tory mayoral candidate for London, an eight-month stay of execution. It plans to complete all of its existing projects.

Vince Cable, Liberal Democrat Treasury spokesman, said many schools and councils would be relieved that Jarvis had not been forced out of business.

But he said: "This is a sticking plaster solution and it is not at all clear where Jarvis and its PFI commitments will stand in the long term."

PFI deals usually cover maintenance as well as building work and can last up to 30 years. In the case of bankruptcy, banks that lend to projects are expected to find an alternative contractor.

Meanwhile a troubled pound;340 million privately financed school building scheme, already delayed for nine months after a construction firm went bust, has lost its financial backer.

Abbey, which had been funding the 27-school project in the London borough of Tower Hamlets, has withdrawn following its decision to pull out of the PFI market.

The TES understands the company carrying out the maintenance side of the contract may be replaced following complaints from schools.

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