Croydon Council’s financial position is under review – how this relates to Brick By Brick

Croydon Council’s financial position is under review – how this relates to Brick By Brick

Croydon Council’s financial position is under review – how this relates to Brick By Brick

Croydon Council is in discussions with government and others about their finances, in particular relating to a potential inability to meet future spend commitments following the Coronavirus crisis. The reasons for this are complicated, and Croydon isn’t the only council in the country to be struggling at this time. There is a useful recent article which details Croydon’s particular situation.

As part of that discussion process, Croydon council has commissioned an external consultancy, PwC, to conduct a review into the council’s group structures and companies. Brick By Brick, wholly-owned by the council, is one of these. In addition, the council’s auditors have raised a number of queries about the council’s investments. This includes their investment in Brick By Brick, as the council currently provides development finance to us (earning interest on these loans in the process).

Although the Brick By Brick model is simple, it is sometimes misrepresented and therefore not always fully understood.

Brick By Brick is in good financial health, and has strong revenue forecasts for the current financial year. Our fundamental objectives as a business are to deliver excellent quality housing for the people of Croydon, and provide a return in the process to our shareholder, the council.  We are doing both these things.

To date we have completed 283 homes across 15 sites, and we generated £23m of revenue in FY19/20. Our draft audited accounts show a pre-tax profit, and we have also accrued for c£6m in overage and c£14m of interest payable to the council. Hundreds more homes are at various stages of construction, providing additional tangible revenue potential.

In addition, our model includes the delivery of a far higher than normal proportion of affordable housing, which offers the council a saving on how it would ordinarily provide new housing for people in severe housing need. Brick By Brick homes can be procured at a lower cost to the council than many other types of affordable housing such as private rental properties or street purchasing, and come with the benefit of warranties and better space standards.

We are really proud of our rate of housing delivery for Croydon. Development takes time. To have delivered so many homes while also creating significant value to the council since we started in 2016 is a very positive achievement. We are now at a tipping point with many more homes due to be completed and more revenue expected for the council.

We will continue to work closely with the council to ensure this pace of delivery continues and also to service all financial queries relating to the strategic review and wider council finances.