Uncertainty over the impact of Brexit on the UK property market has hit two major council investment projects.
Essex County Council this week formally removed £6m from the budget for its £50m property investment fund after pausing further purchases due to worries over Brexit.
Meanwhile, Brighton & Hove City Council has been forced to delay the signing of a development agreement on a regeneration scheme in which it is planning to invest £8m.
The problems emerged in a week that communities secretary James Brokenshire announced allocations for councils under a new £56m fund to help them prepare for Brexit.
In a report to councillors, Margaret Lee, executive director for corporate and customer services, recommended the £6m reduction in Essex’s property investment fund, saying: “Due to the uncertainties caused by Brexit and the potential impact on the property market, the scheme has been paused with no further purchases planned.”
The pause in investment was originally agreed by Essex councillors in November, after advice from its adviser Hymans Robertson not to expand its commercial property programme “due to the current market conditions including the unknown impact of Brexit”.
However, the council has now decided to remove £6m from the investment programme budget as part of a package of measures that will help the authority reach a forecast underspend of £29.6m in its 2018/19 capital spending programme.
Before the programme was halted, £44m of the fund had been spent on property, which the council says is already yielding £1m for council services.
Essex is set to review whether to restart commercial property investment through the fund during the summer.
Meanwhile, in Brighton, councillors have been forced to delay a deadline they set for housebuilder Crest Nicholson to sign the development agreement on the King Alfred leisure centre and housing regeneration scheme.
Originally, councillors had proposed to walk away from discussions with the developer unless it signed the deal by 31 January.
However, it extended the deadline until 30 March – the day after the UK’s date for leaving the European Union (EU), following a last minute plea from Crest.
In a letter to the council, it cited “challenging economic uncertainties surrounding Brexit and the impact this could yet have on the construction industry workforce and wider confidence and stability of the property market”.
It added that “as soon as we have greater certainty over the nature and form of the Brexit arrangement which we all hope and expect will be achieved shortly, and assuming this does give reasonable certainty over the future trading relations with Europe, then we will enter into the development agreement and commit the team and resources required to promote the scheme, develop the design and seek planning in accordance with the conditions and programme”.
In 2016, the council committed £8m to the project, which comprises a sports centre, swimming pool, underground parking and 565 homes in blocks of up to 18 storeys high.
Contingency planning cash boost
In a separate move, the government this week announced that local authority areas will receive £210,000 each to carry out contingency planning for Brexit.
The Ministry for Housing, Communities and Local Government has announced that it will boost the amount allocated for preparations to £56.5m from the £35m originally announced.
The increase falls short of the £70m the department is understood to have bid for from the Treasury.
However, communities secretary James Brokenshire confirmed that it did not include additional cash that councils could receive if asked by departments to take on additional burdens relating to Brexit.
In a written ministerial statement earlier this week, Brokenshire said: “This funding will help councils to adapt to changes caused by Brexit, while still protecting vital local services.
“This [sic] will not be the only resources councils receive to fund Brexit costs.
“Government has been clear that departments will assess and, if appropriate, fund any potential new burdens arising on councils as part of EU Exit work they are undertaking.”
Unitary authorities will receive £210,000 each over two years from the new contingency planning fund.
That amount that will be split in two-tier areas between counties (£175,000) and districts (£35,000).
All combined authorities will receive £182,000, and a further £1.5m will be distributed to local authorities facing impacts on ports in their areas.
Brokenshire said that an additional £10m will be held back “to respond to specific local costs that may only become evident in the months after we exit the EU”. Kevin Bentley, chairman of the Local Government Association’s (LGA’s) Brexit Taskforce, said: “The UK’s exit from the EU will have a significant impact on local government.
“It is positive that the government has allocated additional resources to local government for Brexit preparations, and has listened to the LGA by making some of the funding available this year.”
However, taking to Twitter, Crawley Borough Council leader Peter Lamb criticised the level of funding.
He said: “When divvied up, it’s not even enough to fund one additional environmental health officer for dealing with the added checks at Gatwick, better off spending it on tinned food and paraffin stoves.”
Responding to the government announcement, CIPFA chief executive Rob Whiteman said without any certainty around what form Brexit will take, making preparations is “near impossible” for councils.
He said: “These additional resources have come just two months before the conclusion of Article 50, and local government remains in the dark about their future arrangements with the EU.”
