When you talk to patients about Southmead hospital they often say: “Ah, it really is nice and new, a bit like an airport”. Or like a shopping-mall. And it is obviously a modern hospital and one can argue whether the huge atrium is beautiful, an architect’s wet dream, or a bit of a waste of space that could have been used for more spacious wards or additional medical departments.
But Southmead hospital was not built by a team of NHS workers, consultants, scientists and patients who know about the requirements of health workers and ill people, in collaboration with a team of architects and construction workers who primarily care about a functional and pleasant environment. It was built by a private developer as part of a so-called PFI scheme, which stands for Private Finance Initiative. The main interest of the private developer, apart from making money, is to have a swanky-looking building for their portfolio.
The actual construction of Southmead hospital cost around £430 million, which is not cheap, but compared to the total sum that will be paid to banks, the private developer and maintenance company after 30 years, it is a bargain. The total sum is currently estimated to be over £1.8 billion. So why did the government come up with these PFI schemes, if they are clearly wasting ‘public money’? What is all this extra money for, where does it come from and where does it go? And most importantly, why should we bother as people who work at Southmead or are cared for there? Find out in this article…
The historical background
It started in the naughty 90s, when the New Labour government of war criminal Tony Blair continued the politics of privatisation of their predecessors. This was not a policy choice, but an expression of a particular historical relation between the working class and capitalist exploitation. The struggle of workers in the 1970s had deepened the profit crisis and in order to deal with workers’ power in larger industries, factories were closed or chopped up and relocated elsewhere. Capital escaped from productive investments, such as manufacturing, where the profit rate was low and risky, into stock- and real estate markets. A large mass of capital was floating about, threatening to go elsewhere.
The nationalisation of many industries in the 1960s and 1970s had led to a concentration of workers who felt fairly confident when it came to putting pressure on their united boss, the state departments. Also working class people in general were able to address the state departments directly, when it comes to shortcomings of particular social services, such as housing, health or education. With privatisations, the state tried to get out of this firing line of being put under pressure as boss and welfare provider.
With schemes such as the PFI, the Blair government continued the counter-attack against working class social power. In November 1992, a time of sharp international recession, the government presented the plans of PFIs in the autumn statement. The idea was simple: instead of the Treasury borrowing money on behalf of government departments to finance new infrastructure, each project costing in excess of £5m should be put out to tender, inviting bids from the private sector (banks, construction and maintenance companies etc.).
They tried to mobilise the excess capital to build schools or hospitals, promising good and finally subsidised future profits, and at the same time they outsourced state services and public sector jobs to private companies, such as Carillion, Amey or Medirest. This is a way to undermine the pay and conditions of council workers and to avoid the direct political pressure from working class people in need of public services. And of course an entire cast of politicians and corporate lawyers can enrich themselves in the process of tendering and handing out contracts.
The emergence of the PFI debt trap
Initially the private sector was slow to take up PFI contracts, in particular for hospitals. This changed in 1996/97, when the government gave a commitment that they would effectively act as guarantor for any debts to PFI consortiums, for example if one or more NHS Trusts went bankrupt. After a prolonged period of standstill, the go-ahead was suddenly given to 15 hospital projects in 1997. By 2024, about 730 public sector organisations had their buildings, IT and essential infrastructure managed by a private consortium under a PFI deal, often lasting 30 years. These PFI contracts would turn out to be a profitable business – for some.
Government figures from 2018 showed that the value of the initial PFI investments in the NHS was just £12.8bn, but that the NHS will have spent a total £80.7bn once they are all paid off (this figure includes services such as facilities management supplied by the PFI providers). Nearly half a billion pounds a year (almost £1 in every £5 spent on hospital PFI charges) is creamed off by banks for interest payments. This pushes many Trusts into financial difficulties. Already in February 2012, the Department of Health announced that it would make £1.5 billion available – in grants not loans – to seven hospital trusts in England with the heaviest PFI debt, to enable them to make PFI payments.
In 2023, English NHS trusts were spending more than £2bn a year paying back debt on PFI projects. For example, Sherwood Forest Hospitals NHS Foundation Trust spent more than double on its PFI repayments (£45.8m) than on drugs costs (£22.6m). That works out as more than £1 in every £8 of income it received from patient care activities, finance income and other operating income being spent on paying off PFI debt. According to a study by ‘Every Doctor’, a total of 69 NHS trusts in England have committed to pay more than £21.1bn to private companies under their private finance initiative (PFI) contracts over the next two decades.
The study also looked at the composition of the companies that own the NHS PFI projects. Semperian, which appears to be the largest owner, is an investment fund based in Jersey, a tax haven. The next largest PFI provider is a limited partnership called BIIF. The company appears to have taken on PFI schemes that were previously owned by Barclays. It is not clear if there is a majority stakeholder, but stakeholders include the pension fund of weapons manufacturer BAE Systems. EveryDoctor found that the five largest PFI investors hold half of all NHS PFI contracts.
What happens when you concentrate a lot of public services in rather shaky global corporations became clear in early 2018, when the multinational construction and services company Carillion abruptly collapsed. Carillion was given the initial contract to construct and maintain Southmead hospital. Apart from mismanagement, one accusation was that Carillion had been handing out excessive dividends to investors. Carillion’s collapse halted work on two major PFI hospitals (Royal Liverpool and Midland Metropolitan in Smethwick). The government had to jump in and bail services out.
The construction of Southmead hospital
The new Southmead hospital was opened in May 2014, with the usual announcements of superlatives, e.g. that it had been one of the biggest and fastest PFI projects and that it had more single rooms for patients than any other NHS hospital. But even back then they had problems with the air-flow system of the theatres and they had to cancel 180 operations shortly after the opening. The problem returned in 2024/25 and we wonder if the private developer who is responsible for the construction flaw had to pay for constructing the temporary ‘Parkview’ surgical theatres, or if this was paid for by the NHS.
What wasn’t mentioned when Southmead was opened was that the 800 beds in Southmead didn’t actually match the 1,400 beds that were available before, at the old Frenchay and Southmead sites. These two sites had been run down over time, e.g. in 2003 they were subjected to a £48 million budget cut. While in 2005 there was still talk of keeping Frenchay as a community hospital, that plan was cancelled in favour of a single PFI hospital.
“Furthermore it serves to illustrate the market’s willingness to get on board deals that are well structured, have a sensible balance of risk, and are delivered by a strong sponsor [sic!] – in this case Carillion.” (Finance journalist on the Southmead PFI, 2010)
Initially the contract to build and maintain Southmead hospital went to Carillion. When Carillion got into financial troubles they sold their 50% stake in Southmead hospital PFI in July 2015. The US-based infrastructure investment company HICL bought these for £87.8 million. Shortly after, Carillion went bust.
Loads of highly paid bullshit-jobs
At this point it is important to look at the enormous waste of time and resources that financial structures such as PFIs create. They are presented as dynamic alternatives to the ‘cumbersome’ and ‘bureaucratic’ state structures, but they create their own leeching bureaucracy of corporate lawyers, investment bankers and finance managers. We can only try to imagine how much legal paperwork, board meetings of highly paid managers, consultancy fees for lawyers etc. just the shift from Carillion to HICL must have created.
Then there is the initial process of forming the PFI and negotiating with various investors. The negotiations or ‘procurement process’ between the stake-holders, which are six different banks (EIB – £250 million, Lloyds Banking Group – £150 million, RBS – £75 million, NAB – £51 million, Credit Agricole CIB – £51 million, Société Générale – £50 million), plus the private construction companies and state bureaucrats, took 45 months. Here we are not talking about major architectural work or medical planning, we just talk about highly paid people talking primarily about money and shares of ownership, debt and profit. And they still boast that this was the second fastest PFI procurement in the UK!
In order to run Southmead Hospital PFI as a corporate entity, two additional companies had to be set up, each with their own management structure. These companies will pay staff and office rent for the entire lifespan of the contract, which is 30 years plus. In 2010, four years before the opening of the hospital, NBT signed a contract with ‘The Hospital Company (Southmead) Ltd.’, which in turn is a subsidiary of ‘PiP Infrastructure Investments (Southmead) Ltd.’, whose office is at The Shard in London, probably the most expensive office space in town. In the company annual report, which some consultant has charged £22,000 for, it says that North Bristol NHS Trust has no entitlements in the profits of this company. The other company that runs and owns the PFI is ‘Infrastructure Investments (Health) Ltd.’, based in the tax haven Guernsey, which is part of a US investment firm.
Cagey NBT management and Carillion lawyers
We slowly start to understand how a hospital, whose construction has cost around £430 million, can end up costing over £1.8 billion. But getting a clearer picture of the entire corporate structure is not easy, as a journalist of The Bristol Cable had to find out.
In 2013, Sid Ryan issued a Freedom of Information request regarding the details of the full cost of Southmead PFI hospital, including information regarding the contract with Carillion. The request was rejected by NBT and Carillion and Sid spent the following years going through appeal processes, for which Carillion engaged some fancy lawyers. They never opened the books. At the time, NBT management issued the following statement, explaining why they appealed against having to provide information:
“The Trust made the decision to appeal against the findings of the Information Commissioner because it felt that Carillion had genuine concerns about the commercial prejudice that would arise from the disclosure of certain financial information relating to this Private Finance Initiative. Being satisfied that disclosure would not result in any commercial prejudice to the Trust, the decision to appeal was made on the basis that it was the only means of enabling Carillion to protect information, rather than a desire by the Trust to conceal it.”
Whether the Epstein files or information requests, here we can see that those who have money and power don’t have to adhere to their own rules, and that only mass pressure from below can force them to open the books.
The current situation
If you have ever tried to read a company report you will know that understanding them is not that easy. Referring to the hospital building and the multi-storey car park, the report states: “The total construction cost recognised in the accounts to date in relation to these two assets is £305,150k.” In addition to that they pay the private contractor for service charges: “The contractual service charge for 2024/25 was £8,315k (£7,879k in 2023/24).”
From what we gather, the amount that NBT has to still pay back in terms of PFI and ‘other concession obligations’ has actually increased from 2024 (£585 million) to 2025 (£593 million). This is what happens when you have to pay large amounts of interest on your debt – NBT paid £37.6 million last year. Because our intelligence is limited, we asked ChatGPT to turn all this into a nice chart.
What seems clear to us is that after 30 to 35 years the banks will have received double the amount of interest payments compared to the original construction costs and the private developer will have cashed in a service charge to maintain the building that is nearly as much as the cost of actually constructing it.
What should we, workers and patients of Southmead hospital, do about it?
All this concerns us! If NBT management says that they can’t pay bank staff the annual increase like everyone else, because of ‘financial problems’, then the PFI structure of the hospital is part of the picture. If they allow the closure of the detox unit due to ‘financial reasons’, then the PFI structure is relevant.
The first thing we can demand is open books. As we have seen, this won’t be achieved through information requests. Workers at ST Microelectronics in France, for example, had to go on strike in order to force management to open the books and come clear whether the produced micro-chips are sold to the military sector.
In the future we should push management and politicians to cancel the PFI contracts and stop feeding money to the financial and corporate sector. This money is needed on the ground, for workers and patients, and we should not have to pay millions to banks and their leeching upper class professionals.
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Sources:
https://www.thenational.scot/news/24483666.labours-pfi-locked-scotlands-nhs-decades-debt/
https://www.scottishdailyexpress.co.uk/news/politics/great-pfi-rip-off-scots-34233545
https://www.theguardian.com/politics/article/2024/sep/09/serious-disruption-hospitals-schools-pfi-contracts-private-finance-initiative
https://www.nhsprocurement.org.uk/news/toxic-relationships-shouting-and-lawsuits-bitter-end-britains-pfi-experiment
https://www.theguardian.com/society/2025/sep/24/fears-of-new-pfi-style-disaster-as-firms-handed-6m-to-advise-on-using-private-funds-for-nhs-clinics
https://www.newstatesman.com/spotlight/healthcare/2022/05/pfi-repayments-are-costing-some-hospitals-twice-as-much-as-drugs
https://www.bbc.co.uk/news/uk-england-bristol-27422518
https://www.buildingbetterhealthcare.com/news/article_page/Carillion_sells_50_stake_in_Southmead_Hospital_PFI/110528
https://www.hicl.com/portfolio/project/southmead-hospital-uk/
https://www.ijglobal.com/articles/61636/southmead-hospital-pfi
https://www.nbt.nhs.uk/sites/default/files/document/NBT%20Standing%20Orders%20and%20SFIs%20-%20Trust%20Board%20approved%20March%202022_0.pdf
https://find-and-update.company-information.service.gov.uk/company/07080009/filing-history
https://www.nbt.nhs.uk/about-us/news-media/latest-news/apprentice-director
https://thebristolcable.org/2016/08/carillions-southmead-secrets/
https://www.bristolpost.co.uk/news/bristol-news/jobs-risk-southmead-hospital-uses-1066562
https://thebristolcable.org/2015/11/help-help-to-southmead-hospital-via-guernsey/
https://www.bristolpost.co.uk/news/bristol-news/jobs-risk-southmead-hospital-uses-1066562
https://thebristolcable.org/2015/11/help-help-to-southmead-hospital-via-guernsey/
https://everydoctor.org.uk/reports/pfi-explained-a-simple-qa-on-a-complicated-problem/
