Government agrees to £415m PFI prison deal with Serco

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Government agrees to £415m PFI prison deal with Serco

5/07/10 1:59 pm By Nick Johnstone

The Ministry of Justice’s National Offender Management Service has agreed to a new prison at Belmarsh, London, to be built Skanska and run by by outsourcing giant Serco.

The private finance initiative (PFI)-funded deal has officially closed today, despite question marks over the new government’s commitment to PFI and to building new prisons in general.

The 900-place prison, which will cost £900m to build, is part of the government’s programme to modernise the UK prison estate.

Procurement for this project, together with another 600 prisoner place facility in Maghull, Liverpool, started in late 2007.

The complex will be built with Serco’s construction partner, Swedish firm Skanska, for whom the deal is worth £100m.

The project has been procured using two stages of competitive dialogue, and Serco was appointed winning bidder in June 2009, followed by a period of fine tuning, clarification and confirmation of their winning bid.

The total debt was £129m, with senior debt provided by a four bank club comprising Bank of Ireland, Barclays, Helaba and Royal Bank of Scotland, each lending 25%.

Simon Tanner of PwC corporate finance team, who worked on the deal, said:

“This is a very interesting time to be working on prisons projects – Justice Secretary, Kenneth Clarke, last week announced radical reforms in the UK prison sector, with far greater emphasis on rehabilitation and reducing reoffending rates. This is a global trend, as we see similar initiatives being developed on prison projects we are working on in New Zealand.

“PwC is pleased to be able to help play a role in helping to shape and deliver the objectives of governments across the globe to secure projects which offer value for money while providing 21st century facilities and create a positive environment for rehabilitation.”