Loss-making Brick by Brick produce bogus profits report

All the kerb-appeal of a dog turd: Brick by Brick claim success for a year when they continued to build butt-ugly blocks and still made £10m less than they had predicted themselves

Loss-making house-builders Brick by Brick have delayed the publication of their annual accounts, so it was more than mere coincidence that last night, just 30 minutes before a cabinet meeting was due to begin to discuss the cash-strapped council’s emergency budget and plans to “review” the company’s sorry performance, a piece of publicity appeared online that appeared to show everything is just hunky-dory.

Brick by Brick claim that they have made their first profit. Except that the somewhat modest £250,000 – set against loans of £260million from Croydon Council – that they claim is actually a pre-tax figure. After tax, in all likelihood, the loss-making builders will still be loss-making.

And the £250,000 is dwarfed in comparison with the figure Brick by Brick themselves produced in their business plan for the 2019-2020 financial year, when they predicted that they would be making a profit of £10.32million. Oh, how the company’s owners, Croydon Council, could do with a spare £10million now…

Simon Hall is the cash-strapped council’s cabinet member for finance, who over the past five years has arranged the huge loans to Brick by Brick.

During last night’s meeting, while he refused to answer detailed questions about Brick by Brick’s repayment of its loans, Hall managed to give the game away that the report published on the builders’ website was part of a coordinated effort to distort and mislead, as he suggested that Tory opposition councillors should go away and read about the company’s “profits”.

Simon Hall: BxB has caused a £63m ‘slippage’

As an accountant by profession, Hall really should know better than rely on dubious press releases, rather than a profit and loss account written in black and white. And red.

But then, the signs of desperation have been showing for some months among Hall and his closest colleagues in their council cabal.

“Successful year for Brick By Brick, defying wider economic sentiment” the company trumpeted on its own website, the release apparently orchestrated for them by the expensively hired crisis managers at spinners ING.

Until those audited accounts are available through Companies House, we only have their word for that.

And as contractors who have walked away from Brick by Brick sites in dispute over payments, or the house-buyers who put down deposits for shared ownership houses only to be left out-of-pocket and house-less, or the environmentalists who exposed false claims in planning reports, Brick by Brick’s word can rarely be relied upon.

“We’re pleased to reflect on a year of completions – 283 homes, of which 131 are affordable (including 107 council homes) – and turning a profit, proving our innovative model works at a challenging time for public sector finances,” they tweeted last night.

Until the annual report sees the light of day, it is all just froth.

But it is a narrative that council leader Tony Newman, Hall and others in the clique that controls the Town Hall have also tried to push out there.

In January, Alison “Lying Cow” Butler, the cabinet member for housing, claimed that Brick by Brick “is delivering homes and is delivering profits to the council, and continues to be on target”, a statement which included one outright lie and a couple of highly debatable points.

How Private Eye covered the latest – and last? – council bail-out for Brick by Brick in July

Butler made her own misleading statement after getting Hall to borrow yet another £6million in order to buy up 24 flats in Longheath Gardens from Brick by Brick, flats which the company had failed to sell under shared ownership schemes because … they forgot to register themselves as a supplier.

It is £6million of public money that will have arrived on the books of Brick by Brick just in the nick of time to bolster their latest annual report. There was to be another council bail-out, this time worth a total of £39million for 165 unsellable Brick by Brick homes, in July (though this should be outside the 2019-2020 financial year).

Last night’s cabinet meeting did confirm that it will be a very long time before the council is ever allowed again to borrow more money to lend to Brick by Brick, or to use public cash to buy them out of their next episode of incompetence.

The fact remains that, by the end of 2019, nearly five years after the company was formed, they had managed to deliver just three purpose-built council flats. It’s a return on investment that will impress no one.

And Brick by Brick have never been “on target”. Even according to their own figures published last night, they delivered 69 units fewer in 2019-2020 than they said that they would in their business plan.

It took Brick by Brick just two paragraphs of the article published last night before they publish their first outright lie, as they try, not for the first time, to pretend that the company was not set-up in 2015.

“The range of schemes represents a key milestone for us, since we were established in 2016…”. It is as if they believe that their performance is any less woeful when measured over four, rather than five, years.

Brick by Brick believe that they can lie to the public, even about matters of public record

But then, as they remind us, the company was set up “… with the aim of increasing the pace and quality of supply of new and affordable homes in Croydon”.

They also state that, “Under our innovative business model, all revenues and profit from development activity are returned to the council to be reinvested in Croydon.” The only trouble is, Brick by Brick has so far failed to generate any such profits.

They note, with an element of imprecision which may raise questions, that their “development activity creates c£6million of surplus land value, to be returned to the council as overage”. This would be a significant improvement on what they predicted in the business plan: £3.04million.

But the figure of £14million “to be returned to the council as interest on loans on sales completion” may be a cause for concern, since it appears that Hall agreed to let Brick by Brick off making any loan repayments until after they had secured sales of the homes that they have built, on council-owned property that they acquired at significantly below market price, and then developed with huge chunks of public money.

And this is where this (calendar) year’s council bail-outs totalling £45million could yet come to bite Hall & Co in the arse: as an accountant, Hall will know that you cannot report profit made by selling to yourself. So it will be informative to see how these amounts will be treated in the council’s consolidated accounts.

The council itself has broken the law by failing to make its own, unaudited, accounts available in the first 10 days of September. They say that they hope to publish the 2019-2020 accounts before the end of the month, though they are running short of time to achieve that now.

In previous years, Brick by Brick has published its annual financial report at the start of August.

Last year, they reported a loss of £774,952 to March 2019. So even the modest £250,000 they are claiming for 2019-2020 will only claw back one-third of that loss.

Nowhere in their piece of froth and spin last night have they offered any explanation for the latest figures to be delayed by two months. It is unlikely to be because everything is hunky-dory.

About insidecroydon

News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com
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8 Responses to Loss-making Brick by Brick produce bogus profits report

  1. Charlie Burling says:

    If it is a £250,000 profit. I don’t see how it can be a loss after tax. Tax would be less than £50,000 and, given the losses of previous years there may be no tax liability at all. I’d like to see the full accounts too. Also, a full valuation of the assets as they stand (planning permission taken into account. Of course, the other consideration is the number of completions and starts. It might be that that the actual balance sheet is healthier than some people suspect. On the other hand, if the balance sheet looks ropey and the profit and loss account consists of window dressing (it has been known with companies of all stripes), things demand a radical-rethink. I don’t think BxB is the council’s biggest problem. You also have to acknowledge that social housing in any form is a complete anathema to some people.

    • Moya Gordon says:

      I can’t believe anyone would be against social housing. We need more homes built, but considering less than 7% of land in the UK is built on (satellite images show this) we don’t need to build on precious green space in urban areas which is what Brick by Brick do. We could build whole new towns and villages with the right infrastructure in place.

      • Charlie Burling says:

        Well, opponents of social housing do exist. And quite a few of them are sitting in the House of Commons. There are a lot of obstacles deliberately put in place. Why do you think councils set up schemes like BxB? One group of people who would be against social housing would be some (but not all) private landlords. It’s a supply and demand thing. I agree that there is plenty of land and the nation is wealthy enough to build millions of houses for low rents. But that would frighten the horses.

  2. Gross, Operating or Net profit? There is a big difference between them and the audited accounts will reveal the truth. Let’s hope they will soon be published as they must be nearly ready.

  3. Terry McCarthy says:

    Even more reason for a forensic investigation of the finances of Croydon Council.
    Let’s get the truth on a debt of £1.6billion
    The people of Croydon deserve it

  4. Social Housing is vital, there is no question about that. What is unclear is whether the primary role of Brick by Brick is provision of much needed social housing for the borough or to provide investment income in support of the the Councils operations. If the former, Brick by Brick has spectacularly failed.

  5. Cazza says:

    Brick by Brick Capital & Reserves at the end of March’19 was a loss at £1,287,024.00 even if they made a profit of £250k it would be swallowed up with the ongoing loss and that was 15 months to the Y/E 31/03/19!

  6. Hazel swain says:

    why would anyone be surprised at this ? BbyB build ugly rabbit hutches on in appropriate sites despite multiple objections from local residents some of whom live in social housing! Central Croydon is already overcrowded!!!!!

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