London borough set to close troubled housebuilding arm

The London Borough of Croydon was due this week to agree to close its ill-fated housebuilding operation Brick By Brick (BBB), losses on which have contributed to its financial crisis.

Croydon in 2020 issued a section 114 notice - effectively declaring itself bankrupt - which was followed by two more and Government intervention.

A report to Croydon’s cabinet from Jane West, Corporate Director of Resources, said the council would have to write off loans to BBB estimated at between £62-68m.

Her report said BBB delivered 751 homes, of which 385 have been affordable, at considerable cost to the council and residents.

Croydon received none of the expected dividend returns from the company, and instead “will have no choice but to write off a large loan balance and fund the write off from its own budgets following the non-repayment of debt by BBB”.

West said BBB’s poor performance “has impacted badly on the reputation of the council and also highlighted the shortcomings in the governance of BBB by the then council administration.

“All of these factors and costs have contributed to the £1.3bn debt position that the council now finds itself.”

BBB was set up in 2014 as a wholly-owned housing company that would increase the supply of affordable homes.

Faced with acute financial problems, Croydon decided in February 2021 to cease new activity by BBB but allow it to build out 23 of its 29 sites and return the other six to the council.

West said BBB was insolvent but supported by a letter of comfort issued by the council.

It had repaid most loans to the council leaving the remaining £62-68m, the exact size of which depended on asset disposals.

Once the wind down began all directors would be asked to resign and would be replaced by council officers, who would work with support from accountants Ensors and Croydon’s finance and legal teams.

West said Croydon had looked at trying to sell BBB but this had proven uneconomic.

Mark Smulian