Woking Borough Council faces a £490m write-down of its assets after a joint-venture company suffered “devastating” financial losses, a valuation has revealed.
Newly published accounts for Victoria Square Woking Limited, subsidiary company of Woking Borough Council, have reported that it experienced a loss of £490,479,300 for 2021.
The company is the immediate owner of Woking’s new shopping centre, residential development, and hotel – though backed by a longstanding agreement with the authority.
Woking Borough Council has loaned over £750m to the subsidiary company to oversee the construction of the regeneration projects and to fund operating losses.
Dale Roberts, Woking Borough Council’s portfolio holder for finance and economic development, said: “Even though we had fully anticipated massive losses and signalled them earlier in the year, this is still devastating news.
“Looking ahead, it would be irresponsible to speculate on the details and timings of what happens next.
“However, it is responsible to be transparent about the scale of this situation. Only complete transparency will enable our commitment to finding solutions as soon as possible.”
Even though we had fully anticipated massive losses and signalled them earlier in the year, this is still devastating news.
Liabilities exceed total assets
The accounts also showed that the company’s liabilities exceeded its total assets by £501m and will continue to meet its day-to-day working capital requirements through the support of Woking Borough Council.
The Liberal Democrats, who took control of Woking in May 2022, have criticised the previous administration for approving the council loan to Victoria Square and the “financial loss” revealed in its 2021 accounts.
Ann-Marie Barker, Woking Borough Council’s leader, said: “These belated accounts confirm our worst fears. However, this transparency is an essential step in a long and forensic discovery process.
“The reality of the 2021 accounts was taking place while our efforts to uncover it were being dismissed and played down by the Conservative leadership in control at the time.”
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£2.4bn debt
This comes as Barker warned that the authority faces significant financial challenges in 2023 following her re-election in May.
Woking Borough Council has previously reported that its debt is forecasted to increase to almost £2.4bn by 2024/25, with the authority expected to pay back £60m of borrowing debt this year.
In February 2023, the authority also warned that it is in the “territory” of issuing a section 114 notice as a result of the high level of debt.
Prior to this warning, in October 2022, the minister for local government expressed concerns over Woking’s debt and the lending arrangements for major development that the authority is undertaking.
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