Two new executives have moved to take over controversial Croydon Council owned housing company Brick by Brick as the councillors postponed a decision on its future.
Councillors have approved recommendations from a Strategic Review to remove two current directors at BBB and continue construction of the remaining housing builds on contract. The review was submitted to last Wednesday’s meeting by Council leader Hamida Ali and Interim Chief Executive Katherine Kerswell.
The two board members, chief executive Colm Lacey and chairman Martyn Evans are to be replaced by new representatives with qualified financial backgrounds: Duncan Whitfield, strategic director of finance and governance of Southwark council and Ian O’Donnell, a financial consultant who is working on the financial review at the Council.
The change in BBB leadership came after an independent report by Price Waterhouse Cooper detailed the failings of the council-run housing company and laid out a set of options going forward to maximize repayment of outstanding loans.
The PwC report concluded that Croydon’s finances would be even worse if the council liquidated BBB assets or closed the company, stating that continued investment was necessary “before a cash return is generated.”
Another round of review by PwC, supplied with more detailed accounting and financial information will be commissioned before a final decision can be made on the future of BBB.
“At this time, we do not believe BBB’s information is robust enough for the Council to make a strategic decision in respect of these options,” the report said.
According to the PwC analysis, the sale of BBB assets is less likely to recoup some of the £250m of debt owed to the council than allowing the company to see out the remaining housing builds.
The Strategic Review affirmed the risk posed by shuttering Brick by Brick.
“There are over 20 [housing] schemes currently on site which have existing funding agreements in place, although some of these are past the repayment period. To stop BBB drawing down on those agreements could present cash flow issues with consequences that would further increase the risk to the Council.”
Brick by Brick is thought to be a major contributing factor in Croydon’s debt crisis and decision to announce a Section 114 notice, the formal proceedings for municipal bankruptcy. Revelations of gross mismanagement at the housing company compounded with years of austerity and unexpected costs from COVID pushed borough finances to the edge. Loans for capital projects and BBB builds totaling over half-a-billion pounds remain largely unpaid.
Conservative leader Jason Perry slammed the Labour council for not “considering their fiduciary position” when designing the Brick by Brick housing company.
But the South Croydon councillor accepted the premise of the PwC report and Strategic Review, only demanding assurance that no new housing builds be approved: “I understand some money will need to come forward to finish sites. You do need some sites to be finished to try and resurrect some money from this company, but please assure us that you will not allow any more new sites to start.”
Read the rest of our coverage here:
– Croydon Council declares itself bankrupt in £1.5bn debt crisis
– Croydon debt crisis: Council draws up action plan to cut costs
– Tories attack shelving of key flood protection projects
– Tories accuse Croydon leadership of ‘recklessness’ with public money
– Top executives at council housing body ‘to be removed’ down after damning report