P.F.I. – Profiting From Infirmaries


This report looks at how much profit has been generated by the private companies owning and operating NHS hospitals and other facilities under the Private Finance Initiative over the past 6 years, and the impact of this on NHS finances at a time of severe funding shortfalls. The Private Finance Initiative is a scheme whereby private companies borrow money from banks and shareholders to build NHS hospitals and facilities. The NHS pays an annual charge to the PFI companies partly for use and maintenance of the hospitals but also to pay back the money, and interest, the private companies have borrowed. The contracts with the PFI companies can last for up to 40 years. This means that the NHS is legally committed to paying an annual charge to the private companies running these hospitals for the foreseeable future.It identifies for the first time the amount of taxpayers’ money which has been transferred to the profits of PFI companies.


It is based on a study of the official Treasury database on Private Finance Initiative schemes and the accounts of PFI companies which are held by Companies House. It finds the following:

Total value and cost of PFI to the NHS

  • Over the past 6 years (between 2010 and 2015) the NHS and local authorities in England have spent a total of £10.7bn on hospitals and other healthcare facilities built under the Private Finance Initiative.
  • There are currently 125 PFI contracts with private companies overseen by the Department of Health. The capital value of the assets which have been built is £12.4bn. However, over the course of the life of the contracts, the NHS will pay in the region of £80.8bn to PFI companies for the use of these assets.
  • Just 8 companies have equity stakes in 115 or 92% of the 125 Department of Health PFI schemes. This raises concerns over how competitive any future rounds of PFI tendering can be, and over the potential for the abuse of market power resulting from existing contracts.

The amount of taxpayer funds which have left the NHS in the form of profit

  • The PFI companies which hold the NHS hospital contracts have made £831m in pre-tax profit over the past 6 years. This profit is in addition to the profits made by the banks on the loans they have made for the building work, by the construction companies which built the hospitals, and by the companies which provide maintenance and other services for the hospital buildings. The PFI companies whose profits are the subject of this report employ only a handful of people whose main role is to receive and allocate the income from the NHS paid by the hospital trusts.
  • This means that around 8% of all the money which the NHS has paid to these companies over the course of these 6 years has left the NHS in the form of pre-tax profit and is not available for patient care.
  • These contracts generated £480m of dividends which were paid out to those who had invested in the companies, equivalent to almost 5% of all the money the NHS has paid.
  • The returns expected by those investing in and lending to PFI projects are also far higher than they would get if they invested elsewhere, even though they are very low-risk, because the government guarantees that the payments will be made so long as the hospital is available for use and the services meet the standard set out in the contract.
  • In some instances the amount of NHS funding for PFI hospitals which goes to pre-tax profit is much greater than 8%. In 13 contracts it was over 20% The PFI company which runs University College Hospital London (UCLH) generated £139.7m in pre-tax profit over the course of 2010 – 2015, 31% of all the money paid to it by the NHS Trust. In total between 2005 (when the scheme first became operational) and 2015 the NHS Trust has paid the PFI company running the UCLH £724.8m, out of which the company has made pre-tax profits of £190.4m and post-tax profits of £150.1m. The total capital value of the hospital according to the Treasury is £292m.  The SPV provides other facilities services for the hospital trust in addition to constructing and maintaining the PFI hospital so in this case the unitary charge figure has not been used. The funds paid by the NHS includes turnover from the provision of services and the financial asset interest receivable which combined are greater than the unitary charge figure. It is unclear whether the capital value provided by the Treasury includes capital enhancements and further building work carried out since the financial close of the contract in 2000. Any further work will likely increase the capital value

The impact of this on NHS finances and the overall funding shortfall

  • The cumulative deficit of all NHS hospitals over the period covered by this study was £3.4 billion. The impact of this underfunding would have been reduced by just under a quarter if the £831m in pre-tax profits made by PFI companies had instead gone to fund patient care.
  • The government has increased the amount to be given to the Department of Health by £4.5bn in real terms between 2015 and 2020/21. If the PFI companies continue to accrue profit at the same rate as in 2015 – (i.e. at an average of 9.4%) they will earn around £973m in real pre-tax profit.
  • This will means that the equivalent of 22% of the new money for the NHS will be potentially paid to private companies in the form of pre-tax profit – almost £1bn that would otherwise be available for patient care over the next 5 years.


In order to ensure that the best use is made of scarce public funds to care for patients at a time of extreme austerity the NHS and the government should look at ways to curtail excessive profit-making from Private Finance Initiative contracts.
The following strategies are available:

  • Use public sector loans to buy out PFI contracts (11 PFI contracts have been bought out since the 1990s, including two NHS hospitals)
  • tax PFI companies to recoup some of the excess profits which have been made;
  • cap the amount of profit which can be made by a private company which has an exclusive public sector contract with the NHS;
  • ensure that when PFI companies sell equity stakes in their contracts the profits made from the sale are shared with the NHS party to the contract;
  • mandate greater transparency of equity sales to prevent the unnoticed consolidation of market power by a few investors, with the potential to reduce competition at the expense of taxpayers in future; and
  •  re-negotiate the contracts with the PFI companies to reduce the amount that the NHS pays.
  •  Finally, as we have noted in a previous report, the government should reconsider its use of the Private Finance Initiative and consider using public borrowing to fund new capital investment in hospitals. This is likely to be much cheaper and will mean that less money for patient care will be wasted in payments to shareholders, which is particularly important when the NHS is going through the most austere decade in its history.

The full report is available on the CHPI website