A projected loss of £1.3 million on Wokingham borough council’s Carnival Pool flats development was in the spotlight at a recent council meeting.
At the November meeting of Wokingham’s full council, Cllr Charles Margetts asked Cllr Stephen Conway,the executive councillor for housing, partnerships and the local plan, said: “The Carnival Pool development was planned to generate a profit for the taxpayer of £1.4 million. It is now expected to make a loss of £1.3 million.
“This is a very significant loss to the Wokingham taxpayer.
“What lessons has the Council learnt from this saga and what steps have been put in place to ensure nothing like this happens again?”
Cllr Conway replied, saying: “The Carnival Place development is the last piece of major construction works within the enormously successful and award-winning Wokingham town centre regeneration project, which has delivered new and improved services to our residents and supported the economic development of the town centre.
“I was delighted to visit the completed scheme earlier this month and see the quality of the build and how energy efficient and sustainable these new homes are.
“The Carnival Place development was originally, many years ago, as you said, expected to generate a surplus of £1.4 million.
“That was a projection and an optimistic one, but due to unprecedented challenges during its construction – including two contractors going into administration, the extreme impacts of the Covid pandemic on the construction industry and the longer term impacts of Brexit – all of which elongated the timescales of the project and added costs.
“It is now projected, and I say that word advisedly, projected, to make a loss of £1.3 million.
“ For clarity, the borrowing for this scheme, as part of the wider town centre regeneration project, is repaid through dedicated income streams, not through council tax receipts and local taxpayers.
“These difficult circumstances, that I have just described, were outside the council’s control, but we have carefully reviewed the experience to identify lessons for future projects.
“While the council already had robust procurement and monitoring processes in place, this project has highlighted the importance of planning for extreme market volatility and contractor insolvency. As a result, we have strengthened contingency planning, introduced more rigorous stress-testing of financial assumptions, and enhanced early-warning mechanisms for supply chain risks.Cllr Margetts said: “I share your comments regarding the overall town centre, totally.
“I note what you said about improved contractor selection and things like that. I also note your comments, and I do not disagree with them about the economy and difficult situation in the building industry, but there is one decision in this which is concerning, and which I would appreciate further comment on. It is the decision to appoint Osborne in February 2024.
“Now Osborne – anyone who checks on Companies House today will find that they at that point they had not filed a set of accounts in September 2021. Their accounts then had the comment in there that they were not a viable concern without support of their parent company. September 2023, the insolvency risk company Red Flag advised they were a severe credit risk.
“They were financially restructured in 2023 with most of the directors replaced.
“The council appointed them in February 2024, and they went bust into administration in April 2024 with debts of £45 million.
“Now I am not saying that is the sole cause of what happened. I fully accept there were other causes which actually went into that as well. I welcome your comments about better procurement procedures which indicate to me from this story, were absolutely needed. But I would ask for the satisfaction of, you know, all councillors here, that those procedures are shared with the full group so they can have confidence going forwards that when the council is making these big financial decisions and running these big financial risks that this kind of story cannot happen again.”
Cllr Conway said: “I think we will happily share with you the details you have asked for.”
