28 September 2023

Scotland was once the powerhouse of UK Public-Private Partnerships (PPPs). But changing times call for changing methods. A roundtable event hosted by independent UK law firm Burges Salmon shone a light on new approaches to maintain a vibrant market. The event, chaired by Partnerships Bulletin, brought together a wide range of organisations, and this article summarises the key takeaways. 

Not so long ago, the Scottish Futures Trust (SFT) was renowned for pumping out a series of projects under its non-profit distributing (NPD) model as part of its wider infrastructure planning, financing and delivery role. The agency was presenting a strong pipeline of deals that industry professionals recognised from their time delivering PFIs, but which were far more acceptable to their public sector partners.

However, times have changed and so too has the role of the SFT – and other government organisations. SFT chief executive Peter Reekie laid the groundwork for a discussion on the role of private finance in the future of Scottish infrastructure by setting out the fundamental differences facing the market today, compared to the world of the post-2008 financial crash.

He explained that while the traditional conception of ‘PPP’ has been based around public sector assets requiring private sector finance (generally paid for out of government budgets and taxation), there is a growing shift towards private sector infrastructure now in need of some public sector investment to make them viable - generally paid for by consumers and often with some form of regulatory regime. 

This, of course, is largely down to the significant demands placed on the industry by the energy transition, and as Scotland looks to embrace that brave new world, the SFT and others are playing a new part.

The representatives from the Scottish National Investment Bank (SNIB) and the UK Infrastructure Bank (UKIB) agreed with this sentiment, and set out where they can play a role, at various positions in the capital stack, with the aim of unlocking development wherever that might be needed. 

In the current economic climate, participants from all sides acknowledged the difficulties being caused by continuing inflationary challenges on the one hand, and rising interest rates on the other. The cost of capital was recognised as a challenge, while costs in the supply chain, including labour and materials, are all going up. Agreeing prices with developers to deliver new housing was also highlighted as a major difficulty in this environment. As one put it, the case to invest in new assets is now harder than perhaps at any point in the past five or even 10 years.

As a result, private capital is getting more selective, and all participants agreed that Scotland is now in a competition with other markets - such as the Middle East or the US, as prime examples - to attract investors. “We’re competing internationally for capital now and there are other markets that maybe give a bit more certainty about what models are being used and what the pipeline looks like. That kind of guidance is really important,” said Stuart McMillan, partner at Burges Salmon. 

For many years after the demise of PFI in the UK, Scotland had enjoyed the position as a key market for investors, thanks to its non-profit distributing (NPD) and Hub programmes that provided attractive opportunities for investors. But with those programmes no longer producing significant opportunities, investors are increasingly being attracted to other markets.

Nonetheless, there was a feeling in the room that there is generally no shortage of funds for well structured projects, with a discussion taking place around transport in particular, where both rail and bus projects were highlighted as areas of significant potential for private capital to provide the nudge that is necessary to help deliver decarbonisation strategies. A number of participants pointed to hydrogen production, where schemes that have a clear route to long-term, stable buyers of the hydrogen produced are able to get the investment they require.

This brought participants to a recurring theme of the roundtable: who will ultimately pay for the new infrastructure that is required? As an example, participants spoke about heating. While there is a desperate need for people to transition away from gas boilers, at present there is an inherent cost attached to any replacement - whether that be heat pumps or being connected to heat networks. In these instances, homeowners are often being asked to pay for this through their energy bills, which are already increasing due to rising inflation. 

Even if private capital will pay the upfront costs, those costs will most likely eventually be recouped through higher bills to consumers. In an environment where making an argument for higher bills is a politically difficult one, this remains a challenge. FGovernment and industry will need to look at a whole range of options to mitigate those higher bills - potentially considering other approaches such as releasing value from the asset through mortgage or other products.

Some in the room lamented the amount of delay that is in the system in Scotland, and argued that too much time is spent debating value for money, instead of focusing on laying out the priorities that government wishes to deliver.

This issue, combined with the difficulty of making the case for who should pay for the energy transition, led into another major theme of the discussion, related to political leadership.

While some wished for the politics to be taken out of infrastructure decisions, it was acknowledged that this is not possible in practice - with even the work of the National Infrastructure Commission and its National Infrastructure Assessment that sets out the long-term vision for infrastructure in the country, requiring political buy-in for its recommendations to have any real weight.

Participants agreed that the “revolving door of policy” has made life difficult for the industry, and the discussions around this were heightened given that the roundtable took place on the day that UK Prime Minister Rishi Sunak announced major changes to his green energy policy that many have seen as watering down the efforts to move to Net Zero.

While this could offer the chance for Scotland to differentiate itself from Westminster, and carve out an opportunity for itself in the green energy space, some in the room suggested that such a move would be politically difficult if homeowners in Scotland see their costs increasing at a faster rate than those south of the border.

Despite this, the strong renewables industry in Scotland was highlighted as an example of the country’s ongoing success - and an area where new and future investment could be attracted. 

This call for leadership was echoed by those considering more local developments, and a recognition that the Hub programme had been a good vehicle for bringing different public authorities together to find ways of working collaboratively to deliver outcomes that suited all parties. This work continues, with the Hub vehicles now acting as the conveners and providing the leadership role of setting the agenda and working through what the priorities are for the different areas.

However, the stumbling block for much of this work comes back to the question of cash, with many more projects sitting in the priority bucket than can be funded. It was suggested that this may be where organisations such as the SNIB and UKIB could play a role - provided that those projects are structured in ways that meet those banks’ respective mandates. If these community developments can be unlocked, a new programme of social infrastructure could yet emerge in Scotland.

It was acknowledged that developing and building relationships between the public and private sectors - whether through the Hub mechanism or by other means - is a “really fertile area” for the infrastructure market. Such structures can lead to more entrepreneurial approaches, according to participants, in a variety of areas from heat networks to large scale initiatives like freeports.

Like many markets around the world, Scotland is facing a number of challenges. Some, however, are unique to the country and these will require some unique solutions. Despite this, there remain opportunities in the country and while it may struggle in some ways to compete with exciting new markets like those in the Middle East, areas such as renewables and the wider energy transition (whether that’s heat networks or new transport infrastructure) still provide a strong opportunity for investors, regardless of political obstacles.

“There’s lots to be done, and there’s lots of positivity around doing that,” concluded McMillan. “But at the same time there are constraints, in terms of money in the bank, but also there’s a persuasion constraint, in that you can only take people so far and people have to be persuaded that this investment is a good thing.”


  • Jonathan Terry, UK Infrastructure Bank
  • Peter Ewart, Tribe Infrastructure
  • Neil Fleming, Barclays
  • Craig MacDougall, AECOM
  • Eddie McAvinchey, Scottish National Investment Bank
  • Lesley McEwan, Deloitte
  • Paul McGirk, Galliford Try
  • Peter Reekie, Scottish Futures Trust
  • Derek Sharkey, WSP
  • Iain Sinclair, Global Energy Group
  • Craig Young, Equitix
  • David Rose, Rock Rail
  • Stuart McMillan, Head of Infrastructure, Burges Salmon
  • Claire Logue, Director, Burges Salmon
  • Paul Jarvis, Partnerships Bulletin

Key contact

Stuart McMillan

Stuart McMillan Partner

  • Head of Infrastructure
  • Banking and Finance
  • Energy finance

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