Brick by Brick to get second £10m loan to avoid going bust

CROYDON IN CRISIS: Council Tax-payers haven’t finished coughing up for the borough’s failed housing developers.

Going cheap: the sale of Brick by Brick won’t end the council’s spending on the failed project

The cashflow crisis continues at Brick by Brick, as its sales of new-built homes has failed to cover its operating costs.

As a consequence, Brick by Brick is to get another £10million loan from Croydon’s cash-strapped council. Without that cash injection, according to one of the council’s most senior officials, Brick by Brick “could be forced into insolvency, destroying any value that may be in the company”.

This latest money is supposed to tied over the loss-making house-builders until the sweetheart deal with prospective buyers Urban Splash goes through.

That’s according to an official report going before Monday’s council cabinet meeting.

The recommendation is being made by Chris Buss, the council’s interim finance director who has overseen negotiations with Urban Splash.

Chris Buss: another £10m to keep BxB afloat

The £10million is the second such loan to be made to Brick by Brick in just three months, and is necessary, according to Buss’s report, “due to possible delays with forecast sales receipts” – meaning that the council’s house-building company has failed to sell those homes which it has managed to complete.

Brick by Brick – the council-owned company that was operating without a finance director – has borrowed more than £200million from Croydon Council since it was formed in 2015. It has failed to repay a penny.

The company’s failure to deliver £36million in loan repayments, interest and any profits from property sales was given as a major reason for Croydon Council having to issue a Section 114 notice last November – effectively admitting it was bankrupt. Croydon is only the second council in England to issue a S114 notice in 20 years.

The council is now trying to cut its losses with Brick by Brick by finding a buyer to take on the development business. As Inside Croydon reported a week ago, it has been in negotiations with a sole and preferred bidder, Manchester-based Urban Splash.

And as Inside Croydon revealed exclusively, to sweeten the deal for Urban Splash, Buss is recommending to the council cabinet on Monday that £69million of cost over-runs incurred by Brick by Brick in its bungled refurbishment of the Fairfield Halls is being wiped off the company’s balance sheet and taken on by the council.

Buss’s report asks the cabinet to, “Agree that the consolidated loan agreement shall, if required, be varied to include a further loan drawdown amount of up to £10million to cover additional working capital, in the event that this is required by Brick by Brick due to possible delays with forecast sales receipts”.

Helpfully, Buss provides a parenthetical note, just in case any of the borough’s councillors can’t remember what he got them to agree three months ago: “this is in addition to the £9.99million agreed by cabinet in February 2021”.

Sales pitch: BxB homes on Montpelier Road, Purley, only went on sale this week – more than four years since planning permission was granted

The additional loan, Buss’s recommendation states, is “to address immediate operational needs”.

Elsewhere in his report,  Buss explains, “The February report placed a limit on the amount of additional working capital that the council could loan to Brick by Brick of £9.99million.

“This limit was based on the assumption that Brick by Brick would be able to recycle sales income from both affordable and market-priced house sales. This limit has been reached as anticipated in the February report. However, anticipated sales of both private and affordable units have not been made in line with forecasted revenues, due in part to the deferral of the final decision on the purchase of affordable rent units discussed in this paper and as such it is possible that the company will need further funds for working capital.

“At present there is no mechanism for increasing this limit. Without working capital the company will not be able to function and the company could be forced into insolvency destroying any value that may be in the company. In the light of this it is recommended that further working capital funds be provided.”

Under Brick by Brick’s chief executive, former council official Colm Lacey, progress on all of the company’s sites has been tortuously slow.

A year ago, before anyone at Croydon Council would dare admit that there was any crisis with the failed housing developer, Inside Croydon reported that Brick by Brick had missed its sales targets by a stonking 83 per cent.

The Montpelier Road and Kingsdown Avenue site in Purley is a case in point.

The council handed over what was previously public open green space to Brick by Brick to build on more than four years ago. Planning permission was granted by Croydon Council in April 2017.

The chair of the planning committee then was Labour councillor Paul Scott. His wife, Alison Butler, was the Labour-controlled council’s deputy leader and cabinet member for housing.

She greeted the news of the first tranche of Brick by Brick sites all being granted planning permission by her old man’s committee with an official press release, stating, “Croydon is in desperate need of good quality, affordable housing and this innovative approach will enable many of our residents who are homeless or stuck in temporary accommodation the chance to move into affordable homes of their own.”

Alison Butler in 2017. She, and her husband, Paul Scott, remain councillors, despite their part in the Brick by Brick fiasco

The Montpelier and Kingsdown site was supposed to deliver 34 new homes by 2019.

Yet it has only been this week – two years late – that Brick by Brick has released some of the properties there for sale: 17 houses and 11 flats, with the government subsidy for housing developers, Help to Buy, available.

Six flats, intended for the highly unaffordable shared ownership scheme, are still not finished.

A three-bed house in the development is on offer for £550,000. Hardly the “affordable homes” that were promised by Butler and Scott.

It is looking increasingly likely that the Butler and Scott-driven Brick by Brick misadventure will end up costing the people of Croydon at least £100million in money sunk into a black hole, never to be recovered, even once the benighted company is sold off.

And on the Montpelier and Kingsdown site, there is not a single social rent or council home to be delivered.

Butler and Scott remain as Croydon councillors.

Read more: Council to pick up £69.2m costs of failed Fairfield Halls refurb
Read more: Conflicts of interest, incomplete contracts, unlawful payments – how the Fairfield Halls refurbishment cost Croydon £50m-plus
Read more: Making a Splash: big bailouts behind Brick by Brick’s buyers
Read more: ‘An accountant could have foreseen this more than a year ago’

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This entry was posted in Alison Butler, Brick by Brick, Chris Buss, Colm Lacey, Croydon Council, Paul Scott and tagged , , , , , , , , . Bookmark the permalink.

20 Responses to Brick by Brick to get second £10m loan to avoid going bust

  1. Humph!!!! I think Tony Newman, Paul Scott and Alison Butler should be asked to stand a personal security for that little loan, don’t you?

  2. Carrie Low says:

    I have no words, this is completely ludicrous!!! Take back the properties as honestly speaking if stupid brick by brick haven’t repaid any loans then these properties really belong to Croydon Council, Get a decent company in to finish the shoddy work and then rent the homes as social housing.

  3. sabview says:

    One starts to loose track of where all our money is going, not that we will ever see it again.
    Imagine in the overheated property market of the moment houses should sell in a couple of weeks if correctly priced.
    I seem to remember that it was said on these pages that Brick by Brick was dramatically overstaffed as compared to a commercial developer not to speak of doubtful levels of competence, has the council overseen a clearout of this plethora of staff, and ensured salaries of those remaining reflect competence and value – or don’t they give a fig?

  4. CentralCroydon says:

    When you consider all the stories about buyers desperate to purchase, buying homes without even seeing them, and crazy prices, it shows how crap and overpriced these homes are as they clearly aren’t flying off the shelf.

  5. Hazel swain says:

    please stop giving them any more of my money and stop building on spaces that dont really exist ,

  6. Maverick says:

    I’m somewhat confused….I thought the Council was bankrupt. You need to take a step back and look at a company that was a joke from its conception , it’s now time that the Council to puts its hands up and admits that the company is a complete disaster and just let it fold.

    • Keep up, Mav. They’ve been given £120m over two years to play with now. So just watch as all those exec director and director positions are filled, while front-line staff jobs continue to be axed.
      Part of the government deal that secured the bail-out cash was a disposal of certain assets, including Brick by Brick. But you can’t sell a company that has gone broke, hence this latest bail-out for Colm Lacey’s vanity project.
      It should mean that instead of losing £200million on Brick by Brick, the people of Croydon only lose out maybe £120million because of the egotism, ineptitude and incompetence of the likes of Lacey, Butler, Scott and Negreedy. Trebles all round!

      • Maverick says:

        Silly me !! how did I forget that, well I suppose someone has to pay for the nice pay rise for the Directors……

  7. Tony Campbell says:

    Where can you buy building land for just £1.00 CROYDON Montpelier Road Kingsdown Av , that’s what A independent building company owned by Croydon council

    • Sandy Stead says:

      How many other pots of land were sold to Brick by Brick for a £1. They will now be included in the eventual disposal to Urban Splash. So the total value that has been lost on this vanity project is not only the loans that will never be paid back, but the real cost of these land parcels that were sold for £1. So does anyone know what the real loss might be to the taxpayers of Croydon ? Perhaps they can’t sell the properties because no one wants to buy a Brick by Brick built property. I suspect the Council are having to underwrite any guarantee on the development. Looking at the mess they made of Fairfield Halls, there might be a few claims made over the next few years. It’s the gift that will just keep on giving.

  8. That “Butler and Scott remain as Croydon councillors” shows how shit Croydon Labour is. That pair should have been kicked out of the party as soon as Newman was toppled. Instead they hang on like a couple of turds that won’t flush.

    How much money have those two, along with Newman and Hall, cost this borough with their arrogance, incompetence and stupidity? Is it £120m net for Bricks by Pricks plus the £69m (so far) for the unfinished Fairfield Halls?

    It’s a pity the lot of them can’t be surcharged and barred from holding public office ever again.

  9. How good is Buss? Does anyone actually know?

    Problem with buses, you wait ages for a bus and then two come along at once.

  10. Micky Davies says:

    Stop, stop, stop!!!!!!!!!!!!

    What the hell is going on with these morons in Croydon Council, you must stop throwing OUR good money after bad, these fools at BXB have clearly proved they are not competent, why oh why would you keep throwing millions at them like it was confetti?

    People, this is our money, OUR MONEY they are STILL pissing up the wall. Croydon residents, let’s take matters into our own hands and all stop or delay paying our council tax NOW. Only withholding our money from them can stop them abusing it. Please, please let us do something to halt this.

    What on earth were central government thinking, giving them another £120 million to waste, it is us who will have to pay this loan back, US!!

    I thought this Buss guy was supposed to be coming in as a hatchet man, he’s just like the rest of them before him, flushing our hard earned money down the plughole. This just has to stop now!!

  11. moyagordon says:

    Would it make sense to make all the Brick by Brick developments for social housing and stomach any losses knowing at least children who are currently being forced to live in dangerous council houses are safe. Oh but there’s still the issue of getting the council to maintain their housing stock appropriately. What a nightmare.

  12. Carrie Ann says:

    I just wonder how many more articles need to be written before any change is made??? It seems piss poor to me that this is openly going on and naff all is done about to stop this crazy situation!!

  13. Lewis White says:

    Here’s the Wikipedia entry about the Audit Commission. What a shame that Eric Pickles got rid of it. Perhaps his biggest discontributions to national checks and balances.

    Here it is:-

    The Audit Commission was established under the Local Government Finance Act 1982, to appoint auditors to all local authorities in England and Wales and it became operational on 1 April 1983.[3] The National Health Service and Community Care Act 1990 extended the remit of the Commission to cover health service bodies. Legislation covering the Commission’s activities was consolidated into the Audit Commission Act 1998. In 1985-86 the commission led the investigation of the rate-capping rebellion which resulted in 32 Lambeth councillors and 47 Liverpool councillors being surcharged and banned from office.

    The Commission gained responsibility for auditing the National Health Service in 1990, and fire and rescue services in 2004.[2] In 1996 the Commission began joint reviews of social services (with the Social Services Inspectorate of the Department of Health), and in 1997, reviews of local education authorities (LEAs) jointly with OFSTED.[4]

    On 1 April 2005 the Commission’s remit in Wales transferred to the Auditor General for Wales.
    Westminster Council ‘homes-for-votes’

    The gerrymandering scandal at Westminster Council was uncovered by the Audit Commission’s District Auditor, John Magill, who found that between 1987 and 1989, council houses were sold at below market value to families likely to vote Conservative.[5]

    Mr Magill found the former leader of the council, Dame Shirley Porter and five other council officials ‘jointly and severally’ liable for repaying £36.1 million to the council.[6] Mr Magill’s verdict was upheld in the House of Lords in 2001.[7] Dame Shirley Porter eventually settled in 2004, paying £12.3 million to Westminster Council.[8]
    National Fraud Initiative

    Since 1996 the Audit Commission has run the National Fraud Initiative,[9] a UK-wide anti-fraud programme. Between 1996 and 2013 it traced £1.17 billion in fraud, including £215m in 2008-9,[10] as more councils provided data and most recently £203m in 2012-13.[11]

    On 13 August 2010, the Secretary of State for Communities and Local Government, Eric Pickles, announced that the Commission was to be scrapped, with its functions being transferred to the voluntary, not-for-profit or private sector.[2] The government aimed to save £50m annually, with the Commission’s function transferred to local council ombudsmen and private accounting firms.[2]

    Accounting body ACCA expressed doubt that the private sector would match the commission’s experience and consistency.[12]

    The Financial Reporting Council suggested to a House of Lords committee that Government should not sell the Audit Commission’s practice to any of the Big Four auditors, otherwise their dominance of the audit market would be further enhanced.[13]

  14. Lewis White says:

    Apologies, I forgot the most important bit……… the first lines from the Wikipedia entry on the Audit Commission ( 1st April 1983 to 31st March 2015)

    “The Audit Commission was a statutory corporation in the United Kingdom. The Commission’s primary objective was to appoint auditors to a range of local public bodies in England, set the standards for auditors and oversee their work. The Commission closed on 31 March 2015, with its functions being transferred to the voluntary, not-for-profit or private sector.”

    It does seem to me that Pickles is responsible for scrapping a really vital organisation, that held local government to account. Its fault? Just being too successful in exposing wrongdoing to the light, and going after the perpetrators. . And all to “save” a pathetic £ 50 milion per year. It saved billions, and was effective. Too good at its job for the comfort of those in power.

    We –the country–have been counting the cost ever since.

    Please note, OMMISSION– APOLOGY

    I also forget to mention Pickles’ other contribution to destroying organisations set up to act as watchdogs (wth teeth) on Local Government–that of his disolution of the Standards Board for England and Wales. The Standards Board for England was a non-departmental public body sponsored by the Department for Communities and Local Government. Established under the Local Government Act 2000, responsible for promoting high ethical standards in local government.

    It was formally abolished on 31 March 2012.

    RIP Audit Commission, RIP Standards Board.
    Ever since then, local authorities have been marking their own homework.

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