PRIVATE FINANCE IMPASSE ; Schools, Hospitals, Homes? What the Chancellor Needs for His Spending Plans Is Brickies, Write Clayton Hirst and Jason Nisse

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Gordon Brown's gamble of lavishing pounds 61bn on public services could come unstuck because of a series of flaws in the construction industry.

The Chancellor's spending relies on the Private Finance Initiative (PFI) to deliver new schools, hospitals and social housing. But private contractors are backing out of PFI schemes because bidding costs are spiralling and there is a severe shortage of construction staff.

Last week, PFI specialist Amey warned that it would cut back on the number of schemes it bids for. Anglo-Dutch industrial group Ballast Nedam, also a PFI specialist, said it would drastically scale back its British operation.

Digby Jones, director general of the CBI, said he knew of at least two member firms that were planning to pull out of PFI bidding. "Unless we have quality people running the procurement process - and if the private sector companies start pulling out - this is going to increase costs substantially."

Hardest hit are small PFI schemes, such as a schools and hospitals, where margins are lower.

Richard Tierney, head of public-private partnerships at accountancy firm RSM Robson Rhodes, said: "The Government is beginning to run out of time. PFI projects will be a major plank of its huge investment in public infrastructure. …