Reading Borough Council scraps investment plans
The local authority had been due to spend £180 million on commercial property over the the next few years.
Council to scrap £180 million commercial property investment plans after goverment warnings over three-year spending spree
Reading Borough Council (RBC) has put its commerical property spending on hold and is now to set scrap £180 million of planned further expenditure.
The council spent approximately £74.9 million on four commercial properties from April 2016 to March 2019, with the aim of creating extra revenue which would help to prevent cuts to public services.
It had planned to spend an additional £180 million from April 2020 to March 2023 but the authority now anticipates this will be removed from its medium-term financial strategy as part of a ‘refresh process’ later this year.
The investment was described by Green councillors last year as “gambling taxpayers’ money”.
What's the issue with commercial property values?
The Office for Budget Responsibility (OBR) has now predicted the value of offices and commercial buildings will drop by almost 14 per cent this year.
The boom in online shopping coupled with a shift toward remote working during the pandemic has created lower demand for retail and office spaces.
RBC has estimated it will lose around £530,000 this year from reduced commercial property income due to the pandemic.
The council had hoped to raise around £1.5 million in total from the four properties each year prior to the Covid-19 pandemic.
While RBC is set to receive 75 per cent of its lost income during this year (2020/21) from the government due to the pandemic, investment in commercial properties is excluded from this.
What does the council say?
A spokesman for the council said: “Like many local authorities, Reading has made use of the low cost of PWLB borrowing to invest both improved facilities for local residents, as part of our capital programme, or to generate new revenue streams by investing in commercial property for rental income.
“The council’s investments are diverse and, it should be noted, are significantly smaller than those in some other local authority areas.
“The impact of the pandemic on the council’s finances is being closely monitored, which includes not just the impact on commercial investments but all council income, including fees and charges from council services.
“Options to mitigate all associated pressures are currently being developed as part of the council’s annual Medium Term Financial Plan refresh process.
“No further investment purchases have been made since Four 10 Thames Valley last year and there are no plans to make further investments at this time.”
What properties has the council bought?
RBC spent around £11 million each on Adelphi House, which is a Job Centre, and 160-163 Friar Street in 2016/17.
The council spent further £20.1 million on Kennet Wharf on Queen’s Road, which is Visa’s European home, in 2017/18.
Its final big purchase was a £32.9 million outlay on Four 10 Thames Valley Park in April 2019.
All four purchases were funded through a loan from the Treasury-backed Public Works Loan Board (PWLB).