Brick by Brick speaks out amidst Croydon Council financial crisis

Plans for a Brick by Brick development in Upper Norwood Pic: Brick by Brick.

The Croydon Council-owned building development company at the centre of  a row over huge council debts that have pushed the local authority to the brink of bankruptcy has insisted the business is in good financial health.

The comments from Brick by Brick – set up in 2016 by the council – follow weeks of upheaval for Croydon Council which saw the resignations of three prominent local figures including leader Tony Newman and the arrival of government inspectors for a rapid review into governance and culture there.

The Government review was triggered by a damming report by auditors Grant Thornton, published last week, which condemned the Labour-run council’s risky investments and capacity to manage social care budgets, especially during the pandemic. It said the leaders had put the council on the verge of bankruptcy due to ‘’collective corporate blindness’’.

It criticised Croydon’s running of Brick By Brick, saying the developers had failed to pay back loans by initially agreed times, and recommending the council review and reconsider its investment in the firm. 

The Guardian reported that the audit found that Croydon borrowed £545m during the past three years to invest in housing and commercial property including a £200m loan to Brick By Brick, which has yet to return a dividend. 

Yesterday, Brick by Brick said their company was financially healthy, adding that they had built 283 homes allowing them to generate £23m and that their work would soon profit the council. 

The developer said in a statement: ‘’By its nature, housing development is a slow and complicated business. It takes time to establish a company, assemble land, take schemes through planning, and then build and complete high-quality homes. Sometimes schemes suffer delays from their original forecast completion dates, moving out the completion date and/or point at which repayments on loans are due to be paid.’’

 They added : “We are working very closely with the council to help them fully respond to these matters, but it should be noted that Brick By Brick itself is in good financial health, with strong revenue forecasts for the current financial year.’’

‘’We are now entering a new and important phase where the proceeds from sales of our completed homes can provide a significant financial return to the council to be spent on frontline services at a time of great need, benefitting the people of Croydon. This is the core principle of the Brick By Brick model.’’

The taskforce sent to scrutinize the authority’s finances came after the local authority approached the government for help.

Robert Jenrick, the local government secretary, said he was worried about the way Croydon local leaders allowed this to happen. 

Jenrick said: “The Public Interest Report published this week is damming about the dysfunctional governance within Croydon Council, who have been entirely irresponsible with their spending and investments. There are serious questions that local leaders to answer, and we are stepping in to get the situation under control.’

‘’The situation at the London Borough of Croydon is deeply concerning and completely unacceptable – local people rightly deserve and expect better than this from their local council leaders.’’

Including the £200m loan offered to Brick by Brick, Croydon council has borrowed £545m to invest in various hotels and shopping centres. The Grant Thornton report said these investments were “flawed’’ and showed that the council misunderstood the current leisure and retail market. 

The council is also accused of having failed to control an overspend of £39m aimed at supporting their adult and children social care and having tricked their accounting reports to hide this management mishap back in 2017. This came to light through in an inspection by The Office for Standards in Education, Children’s Services and Skills, Ofsted.

Hamida Ali, the new council leader who recently came to power after Newman stepped down on October 12 has commented on the crisis. After apologising on behalf of the council she vowed to ‘’put this right ‘’ 

She said: “The council’s financial problems have deep roots and while a decade of austerity and the Covid-19 crisis has had a major impact, they do not excuse the issues this report laid bare. Work to improve the situation is already well underway. We have a new chief executive and a new cabinet and together we will do what is necessary to stabilise our budget while protecting the services residents need most. I look forward to getting out and about in the borough in the coming weeks to hear your views about the council and the change you want to see.’’ 

The findings of the government review will be published later this month. 

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