Birmingham City Council’s Paradise Circus development has requested an emergency injection of cash after a “substantial” overspend including debts linked to Carillion’s collapse.
The Paradise Circus Limited Partnership (PCLP) requested £49.5m of additional funding from the project’s local enterprise partnership, which includes £2.3m to cover the balance of Carillion’s liquidation claims, £30m for infrastructure and £17.2m for CPO costs.
The scheme is a joint venture between the council and BT Pension Scheme, and is managed by Hermes Real Estate Investment Management.
Argent is acting as developer and financial backer to the project.
Carillion had been serving as main contractor for the One Chamberlain Square development, which formed part of phase one of the overall scheme.
Bam Construction, which was working on the neighbouring Two Chamberlain Square, was chosen as Carillion’s replacement in March.
The total value of the development had stood at £560m and is due to complete in 2027.
It was allocated a total of £87.8m in investment for all three phases by the Greater Birmingham and Solihull Local Enterprise Partnership (GBSLEP), which was signed off in 2013/14.
The LEP funding was allocated to pay for the demolition of existing buildings including the central library, as well as road alterations and utilities infrastructure.
Phase one was allocated £37.7m, with phase two to receive £28m and phase three £22.1m.
However, according to the report submitted to the council’s audit committee on 20 November, the costs for phase one have leapt by £29.1m to £66.8m – more than the funds originally allocated to phases one and two combined.
The overspend included an extra £16.6m for highways and infrastructure, £1.12m in extra design costs, £1.3m on the programme, £4.3m in inflation, and £3.2m in scope extension.
In a note titled ‘Development and challenges’, the committee stated: “As the project moved into delivery stage, it became apparent additional scope items, design development, inflation, programming, highway-related infrastructure, demolition and remediation costs would require substantially more infrastructure investment than the original LEP contribution of £37.7m planned.”
The council attempted to mitigate issues by undertaking a cost-efficiency programme, which resulted in £2m of savings.
The report also said the council “should have had an internal project manager structure to ensure co-ordination and communication across all internal departments and regular meetings chaired by a director with authority to make decisions”.
It added: “Scope and cost increases were most likely reported and approved by the PCLP including Birmingham City Council directors, but this information was not disseminated within BCC or to the LEP.
“The apparent lack of these has resulted in parts of BCC and the LEP being unsighted on major cost changes.”
In a joint statement, Birmingham City Council and the GBSLEP said: “With regard to the Paradise project, the LEP Board have received a request for further investment in the project. This is currently under consideration.”
A spokesperson for Paradise Birmingham said: “Costs for infrastructure work for phase one of Paradise Birmingham have not increased by £50m or £100m, as incorrectly reported in the press.
“The increased scope of offsite works for phase one, together with a combination of construction inflation and the collapse of Carillion, led to an increase in costs of £29m.
“Private sector funding is in place for our next building, One Centenary Way, and we are awaiting the outcome of the LEP’s considerations regarding a CPO and infrastructure costs relating to phase two.”
Argent has been contacted for comment.