Keepmoat and Sweett Group’s £180 million PFI housing scheme in Leeds is set for “further delays” after Treasury called for the council to review the funding plans and find better value for money.
The preferred bidder consortium, sustainable communities for Leeds (sc4L), which also includes Lloyds Bank Corporate Markets, is now “working hard to identify a viable alternative solution which should achieve better value for money over the project’s lifespan”, said Leeds City Council.
The Little London, Beeston Hill and Holbeck PFI project includes the refurbishment of 1,245 council homes, construction of 388 new council homes to rent and environmental improvements to the estate. It is now unlikely to get underway before October.
The council conceded that trying to reach financial close has been “frustrating”, with slow progress which has meant the costs of funding the project have increased.
The Treasury had assessed the business case based on what it considers to be best value for money for the taxpayer.
A statement from Leeds City Council said that “with very little notice”, the government has advised the council to ask sc4L to seek improved value for money through alternative long term funding options, which it says are now available for similar large scale projects.
The council said the government advice on the scheme is that “the original terms on which the PFI scheme was to have been funded are now no longer feasible and that new, more advantageous funding options are available”.
Councillor Peter Gruen, Leeds City Council executive board member for neighbourhoods, planning and support services said: “We have had many months of detailed negotiations and repeated assurances from the banks telling us that they are committed to the project.
“However, despite these assurances, the progress made to gain financial close has been slow and the costs of funding the project have increased.
“This has been frustrating, and as a result we have encountered a number of delays.
“I know that in the short term this is extremely disappointing for local communities affected by this project. I want to stress that the council is still totally committed to pushing the project through to completion.”
PFI project will include a training and employment scheme leading to around 250 jobs, work placements, apprenticeships and social enterprise opportunities.
Sweett Group, which is equity sponsor with SPV directorship in the consortium, had to defer its annual results announcement last year due to delays in closing the sale of two PFI schemes, including Inverclyde Schools and Dumfries and Galloway Schools PFI projects.
The delays deprived Sweett of £2m of expected earnings for the year and the firm booked a £1m loss.
Sweett chief executive Dean Webster then told H&V News that the group was pulling back from PFI investments, but would continue to provide services to the schemes.
H&V News understands Sweett is about to close the sale of its Dumfries & Galloway PFI scheme.