Bumpy roads deal looks to swerve £50m-a-year funding hole

Birmingham City Council is looking to agree another change to its route map for managing the city’s highways to avoid crashing into a £50m-a-year funding hole.

The local authority is continuing to deal with the fallout from the collapse of its 25-year PFI deal with Amey in 2019, and is not going to meet a key deadline for restructuring its long-term agreement.

The original PFI deal with Amey had started in 2010 but within just four years had become acrimonious, resulting in several court actions. Eventually in 2019 a termination was agreed, with Amey committing to pay £215m to exit.

The settlement also gave a two-year window to restructure the contract for its remaining 14 years.

The restructuring requires the agreement of Birmingham City Council, Birmingham Highways, the Department for Transport, and a group of 10 lenders.

The parties are now seeking an extension to the negotiating period through to August 2023 so that long-term arrangements can be made.

The extension has to be agreed otherwise the £50m-a-year PFI grant from Government will be lost. This funds half of the annual highways services budget and council officers have acknowledged there would need to be “a full restructuring” of its services if it disappeared.

Tomorrow the Council is being asked to approve an extension of the restructuring period, based on commercial terms which are being kept out of the public domain, and agree to a £43m maintenance programme for this financial year.

Birmingham City Council also plans to extend its agreement with Kier to manage the city’s highways for a second time to get through the extended interim period.

Kier Highways was first appointed by Birmingham Highways – a joint venture between Equitix and Foresight Group, supported by some funding from Amey – for 15 months from April 2020. This was then extended by six months to cover the rest of 2021.

Birmingham City Council’s Cabinet has since approved a further extension with an agreement to be put in place “as soon as possible”.

The interim services contract includes the city’s traffic operations, planned and reactive maintenance, inspections and winter servicing.

The PFI contract handed over the maintenance of 2,500km of roads, 4,200km of footways, 95,000 street lights, 76,000 street trees, around 1,100 traffic light signals and over 1,000 bridges, tunnels and highways structures.