Southend on Sea City Council faces increasing concerns regarding how it will fund key housing redevelopments as its own investment portfolio loses money.
The reality for councils today
It is impossible to see the daily news headlines without reading of yet another local authority in England on the brink of financial chaos. Southend is home to one such council. Its near neighbour, Thurrock, spectacularly plunged itself into infamy and bankruptcy due to a poor investment strategy that resulted not only in Essex County Council stepping in to run parts of the council, but also in its former head of finance running away from journalists from the BBC’s Panorama programme.
Yet for Southend City Council, rather than one single foolish investment, it would seem that they face ‘death by a thousand cuts’.
Investments
Councils in England have faced reductions in government funding since the Conservatives came to power in 2010. This, combined with new powers under the Localism Act 2011, meant that local authorities could seek other means of funding their activities.
In the case of Southend, according to the Treasury Management Report, they chose to invest in two property funds, Lothbury Investment Management and Patrizia (Rockspring) Real Estate.
At the Policy and Resources Scrutiny Committee on 15 February 2024 the council reported that its investments stood at just under £19mn in Patrizia and just over £11mn in Lothbury at the start of the 3rd financial quarter of 2023.
By the end of the 3rd quarter, Patrizia had lost 5.96% (or close to £1mn) while Lothbury had slumped by 21.6% (equating to £1.151mn) of its value in just three months.
Reports state that Lothbury is seeking a buyer for its fund but if this does not happen then the assets will be sold with a proportion being returned to the council. Despite this, the council’s finance director, Joe Chesterton, reportedly told the committee that the advice he has been given was to “stay put on these sorts of funds”, and that pulling out would “cost an absolute fortune”.
While it is true that property funds are mostly designed as long-term investment options, the fact is that Southend needs money now.
Cuts and deficits
Last year (2023/24) Southend faced a £14mn deficit and the possibility of having to serve a section 114 notice. This would mean the council effectively declaring bankruptcy. It avoided this but only after taking a decision to defer some of the deficit it faced to the 2024/25 financial year, lowering the debt in 2023/24 to £10.7mn but increasing 2024/25 from £9.3mn to close to £15mn, effectively kicking the can down the road.
With that deficit on the horizon, the council has cut services while facing increased costs from maintaining vital infrastructure such as sea defences, and tourist attractions such as the iconic pier.
Queensway
The current financial gloom also casts its shadow over the residents of the Queensway estate.
Queensway has a number of high-rise residential tower blocks, and was part of a redevelopment of Southend in 1960. Since the early 2000s, there has been talk of renovating or demolishing the towers and redeveloping the estate with formal plans finally agreed in 2020.
Yet that project now sits in tatters. It is owned by a partnership called Porters Place LLC but original partners Swan Housing Association were forced to merge with Sanctuary Housing Association. Sanctuary, however, left the £575mn project last year, leaving Southend Housing, wholly owned by Southend Council, the only member.
Given the state of the council finances it is widely believed that Southend Housing will not be able to fund the project alone. It therefore needs to find a partner with a suitable level of finance before May this year, or risk seeing Porters Place LLC being wound up and the work lost.
Residents of the tower blocks have spoken out about feeling left in limbo, with only cyclical maintenance being provided, and concerns over the long-term future of the project blighting potential private sales of flats.
Queensway resident Mike Smith told the Southend Echo: “As a leaseholder I feel that I couldn’t sell my flat if I wanted to now. I’d like to decorate my flat but I’m thinking why should I put the money and the effort in if it’s going to come down in a few years? If you want to get a new boiler that’s a big investment. The delays put people off doing anything.”
Other failed projects
The residents of Queensway are not alone. Southend has seen a number of high-profile projects delayed or abandoned in recent years. Not all were under the control of the council, who nevertheless have quite a track record of project failure. These include the redevelopment of Roots Hall football stadium, the prefabricated housing at Meadow Grange Fossets Way, the Seafront Museum and the Seaway redevelopment. None have been completed: stalled projects have been left as abandoned shells exposed to the elements, while others have not even started.
After over a decade of promised redevelopment, the council has nothing to show for it, while vital infrastructure crumbles and amenities fail.
No matter how the councillors attempt to balance the budget this year or next, the fact remains that for the residents of Southend, whatever cuts are made will be deep and painful.
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