Birmingham budget woes cast spotlight on Smithfield scheme

Birmingham City Council’s declaration of effective bankruptcy has cast a shadow over the future of its Smithfield partnership with Lendlease. As several agents put it, its section 114 notice is “a sad state of affairs”. But how it will impact the future of the £1.9bn Smithfield development is more pressing. The scheme, developed by the council in partnership with Lendlease, seeks to provide 3,000 homes – including build-to-rent, for-sale and affordable, as well as 1.7m sq ft of commercial space. As part of the plans, some 1,000 trees will green the city centre, alongside a new home for the city’s historic markets and a new plaza, Festival Square (CGI pictured above), able to hold 8,000 people. Industry players believe that the development will inevitably face delays, although several have kept faith in the project’s long-term future. James Cubitt, head of Colliers’ Birmingham office, told EG: “Smithfield will take longer now – it would be naive to think the situation will not impact it. “But I believe Smithfield will happen. There are very few opportunities like it. The circumstances will change, in terms of whether it is still a joint venture, whether they will have some help in it, whether other people will get involved and whether they will have an injection of cash and equity from other buyers. “The scheme will happen one way or the other. What Birmingham City Council’s involvement will be, whether it will be what was originally planned? I don’t know. It’s very early days.” Andrew Galloway, joint head of Birmingham development at Savills, said the project may suffer delays. But, long-term, he said he was “not too concerned” about the latest news. “Yes, it’s a sad day, with section 114 notices,” said Galloway. “It is not unheard of in the modern era – Croydon has done it three times now. And they will continue to do their statutory duties.” Uncertainty surrounds Birmingham’s pipeline Experts fear that as Birmingham City Council will be focusing primarily on statutory services, planning approvals may suffer even more. Cubitt said: “It’s essential spending only, and… what they deem as essential is probably unlikely to include getting planning consent through as quickly as possible.” Regeneration guru Jackie Sadek said: “Planning will be fine in the short term because it is a statutory role and protected. But the idea that this will not affect planning over the long term is laughable.” The problem, added Sadek, is not just with Birmingham. “It demonstrates a chronic level of underfunding, and that at every level of government right now we have dysfunction,” she said. Planning approvals are already plummeting. Government figures out today (8 September) show that planning approvals have fallen by a further 12% over the quarter and by 13% year-on-year. While Birmingham is the latest local authority to file for bankruptcy, the problems it faces are not isolated. Woking, Thurrock and Croydon are among the councils that have already declared financial emergencies, and local authorities across the country are feeling the squeeze on their finances. A study by the Special Interest Group of Municipal Authorities last month said a further 26 authorities could be forced to issue a section 114 notice in the next two years. The Local Government Association has said that extra costs to councils will lead them to exceed budgets by a minimum of £2bn in 2023-24. But Galloway is hopeful for Birmingham. “As a city, we are in a very vibrant region. We have a very good mayor, who is very good at leveraging central government commitment, and we have a combined authority as well. So, there is other public sector money – for example, Homes England is very active in the city.” Government intervention? Another agent in the city, who asked to remain anonymous, agreed with the role of central government in Birmingham City Council’s affairs. He said: “Is central government going to allow that situation to continue? Common sense would dictate that they are going to come up with a solution, work it out and move forward. “It will have an impact, probably short-term, but most of the property stuff the council is involved in has a longer-term play anyway. “There is loads of stuff going on, whether that’s in commercial development or residential – there are cranes all over the place. Birmingham is busy. So I think we’ve just got to wait and see.” Colliers’ Cubitt also championed the aid of central government and said: “We might find that circumstances change when the council gets assistance from central government. “I don’t think it will… damage the success of Birmingham [in the] long term. It’s a little bit of negative publicity that nobody would have wished for.” Birmingham City Council and Lendlease declined to comment. To send feedback, e-mail akanksha.soni@eg.co.uk or piers.wehner@eg.co.uk, or tweet @AkankshaEG, @PiersWehner or @EGPropertyNews Discover which agents have been most active in Birmingham so far this year >> Image © Lendlease