Contractor Edmund Nuttall may have to cancel a 拢21m hospital building scheme in Sri Lanka after the UK government had second thoughts about the project

The company had reached an agreement with the Sri Lankan government to design, build and equip a number of hospitals in the north-east of the country. However, following the tsunami disaster, a source at the firm claimed that the UK had reneged on the promise of a loan that was to part-finance the scheme.

A source at Edmund Nuttall claimed the project initially had the support of the DTI鈥檚 Export Credits Guarantee Department, which operates a loan system to help UK firms to pursue contracts in developing countries that would not be able to pay for projects immediately. The source claimed the agency was to finance 40% of the project, with a Dutch agency lending 40% and Sri Lanka providing 20% of the money.

However, following a change in government policy, it is claimed that the promise of UK support was withdrawn. The company is seeking financial support from foreign governmental credit organisations to enable work to go ahead.

The source said: 鈥淲e had the support of ECGD, but following a moratorium relieving debt to the region the Treasury has decided not to support projects with a loan element to them. We don鈥檛 know what will happen to the project now. We are seeking funds from other countries to enable the scheme to progress.鈥�

The source added that representatives from the firm were flying out to speak to the Sri Lankan government to discuss the project鈥檚 future.

I can鈥檛 imagine the Sri Lankan government is going to be overly impressed. The whole thing is a shambles

Source at Edmund Nuttall

He said: 鈥淭he situation in the region is very bad. The North-east has been ravaged by civil war and by the tsunami. In some places there are no hospitals at all. I can鈥檛 imagine the Sri Lankan government is going to be overly impressed with the situation. The whole thing is a shambles.鈥�

In a statement the ECGD said: 鈥淓CGD was considering an application for support from Edmund Nuttall. No commitment of cover had been given. Cover for Sri Lanka has not been withdrawn but following the tsunami, it is considered prudent that ECGD reassess the Sri Lankan economy and Sri Lanka鈥檚 ability to continue servicing its external debt. Whilst this assessment is under way, ECGD considers it would not be appropriate to enter into new commitments.鈥�

  • The British Consultants and Construction Bureau, which this week took a trade mission to Sri Lanka, said it feared that the Sri Lankan government could hamper reconstruction efforts by expecting projects to be completed on a voluntary basis by foreign firms. A bureau spokesperson said: 鈥淭his work will have to be paid for. We are worried that the country could be developing an aid mentality. British firms have been very generous but they cannot also be expected to offer long-term services for free.鈥�