CROYDON IN CRISIS: Consultants’ salvage plan for failed house-builder is accepted, including the council paying a second time for 190 flats which will be used as social housing. But the full extent of potential losses is kept under wraps. By STEVEN DOWNES
Brick by Brick, the council-owned loss-making housebuilder, is to be wound down, a cabinet meeting agreed last night – but not before it receives another £10million loan so that the company that bankrupted the borough can avoid going bankrupt itself.
And the council intends to buy up 190 homes from the failed house-builder – effectively paying for the properties a second time.
The council made its decision based on the advice of external consultant Chris Buss, who has spent the past five months poring over Brick by Brick’s books and looking for ways to squeeze out of the failed business some value for Council Tax-payers.
As Inside Croydon reported exclusively earlier this month, Buss and management consultants PwC have calculated that the borough could lose at least £100million from the £226million owed by Brick by Brick in loans and unpaid interest repayments over the last six years.
It was the “risk” that £36million-worth of loan and interest repayments due from Brick by Brick this year would not materialise that was given as a primary reason when the council issued a Section 114 notice in November, admitting it could not balance its budget.
The final reckoning, including the likely losses from winding down the company, were again kept under wraps last night, only discussed last night in a secret “Part B” agenda item. Buss said that some of the figures were commercially confidential, as the consultants continue to seek buyers for part or all of the business and its development sites.
Buss was able to tell the listening councillors, and observers from the government-appointed improvement board, that, “There’s a lot more certainty about the figures before you tonight than there was in the Brick by Brick business plan last year.”
In the past three months, Brick by Brick’s directors have been sacked from the board – although Colm Lacey, BxB’s CEO, has somehow managed to keep his job – while the company has appointed a finance director.
In his appearances before Croydon committees this year, Buss has shown himself to be a big fan of the Wednesbury legal principle of reasonableness. Last night, he cited Wednesbury again to emphasise the importance of funding Brick by Brick’s cashflow through the next eight months or so.
It would be seen as “reasonable”, Buss said, “to protect as much as the council can of its investment”. The value in Brick by Brick lies in as yet unfinished and unsold houses and flats.
“If we don’t give that loan,” Buss said, “the company could go bankrupt and all that value would be lost.”
According to the council’s figures, there are 931 housing units under construction by Brick by Brick.
Among the winding-down moves, the council will buy up to 190 homes from Brick By Brick using its Housing Revenue Account. Having loaned so much money to Brick by Brick, and yet to receive a penny back in loan repayments, interest or profits, it effectively means that the council will be paying for these properties a second time. The cost of these flats could be around £50million.
A decision on whether to sell the company to a commercial developer will be made by May. Buss has indicated that there is at least one interested buyer.
The council will also put the College Green site next to Fairfield Halls on the market. This received planning permission in April 2020 for more than 420 homes, shops and community facilities.
In a statement issued today, the council said, “There is a wide range of sites that will now not be developed by Brick By Brick, and the council will decide what to do with each site based on the best option for local taxpayers.
“This will be either by the council developing the sites itself using money from the Housing Revenue Account, selling to other developers or keeping the sites.”
According to Hamida Ali, the leader of the council, “Resolving the future of Brick By Brick and its development projects so they bring maximum benefit and minimum risk to local taxpayers” is key to repairing the council’s finances.
“Our focus now is to make sure that those sites currently underway are completed by this autumn so Brick By Brick pays money owed to the council and more local people on our housing waiting list can get a much-needed home,” Ali said.
“We also have plans to buy up to 190 homes from Brick By Brick using some of our dedicated housing budget – this is important because it would mean even more local residents can access genuinely affordable homes.”
- Read Chris Buss’s full report on the future of Brick by Brick
- Check out the list of schemes under construction by Brick by Brick
- The council’s list of sites that will not be transferred to Brick by Brick
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