I wrote yesterday to the Mayor and other Party Leaders in Liverpool, on behalf of the Liberal Democrat Group, about how the Council needed to look at preparations for a very different future in Liverpool.
Today we had some salutary reminders in the Echo of what has happened in Liverpool following the last financial crash. Another Company which used fractional investment has gone into administration. Meanwhile problems are clearly occurring with a part complete building on the Strand which went into administration last year.
Because of the way that the Council behaved after 2010 brought in to our City developers with no track record in development and no capital behind them. Instead they used fractional investment and other schemes which transferred the risk of development to purchasers. It promised huge returns which were guaranteed but ultimately undeliverable. In the schemes that were finished the capital and revenue returns have been nothing like those promised. Many of the properties have never been completed. Like the Paramount and Rise development they remain half completed shells which have little likelihood of ever being completed.
Accountants acting as administrators and the Police have been investigating. It seems that at least £200,000,000 and possibly up to £500,000,000 has gone missing, wasted or not been applied to the use for which the investment was obtained. Liverpool’s reputation has been sullied internationally and responsible corporate investors have shunned the City. Has the Council learned from this? Who knows? Some things have been improved since the arrival of a new Chief Executive almost two years ago. We still await the corporate response from the Council. The Fractional Investment Task Group was established almost two years ago but has yet to issue its report or recommendations. I produced one which people can get from me at email@example.com.
But it is important that we learn not only because we don’t want to repeat the same mistakes but because we need to understand that this crisis is far deeper than the one in 2008 and will have important repercussions that we need to consider as a Council. The simple fact is that there has been created a huge gap in capital availability globally which will take years to rebuild. There won’t be the money to build things and people’s habits may well have changed at least in the short to middle term. This is how it might apply to just 3 headline schemes in the City:
The biggest is the new EFC ground at Bramley Moore dock. Quite simply it looks highly unlikely that there will be the £500,000,000+ capital required for this project available or available at the right price for the project. There are other factors as well. EFC’s revenue has been badly hit by the crisis. Many costs have continued but revenues have almost totally disappeared. Will those revenue losses quickly reverse when the game proceeds? Some local blue noses may well feel that going to places where lots of people gather is not for them in the next year or so. Even if a partial lock down ends soon the virus will continue to halt or reduce activities until about 12 months after a vaccine has been produced and then more months as the vaccine is rolled out. The likelihood is though, that those who fly in or train or car in from a distance will not be so inclined to do so.
If we go South down the Mersey we come to the proposed Liner Terminal. There is no doubt that the cruising industry will be badly hit for years. The travel industry commentators and researchers have looked at this. The industry largely depends on wealthy elderly people, large numbers of which have been American. These people are reporting that they will not be returning to the cruises quickly and up to 30% of them will never board a cruise liner again. They have been worried about the tales of death on the cruise liners which have highlighted the fact that when, never mind a coronavirus, an infection such as salmonella gets aboard it rapidly spreads and often causes death. How many cruises will come to Liverpool? I don’t know but clearly for the next few years nowhere near as many as we had anticipated. So will the terminal be needed or viable?
Further South, we get to Liverpool Airport where a big expansion had been mooted onto the Oglet foreshore. The likelihood of this happening in the foreseeable future if ever is absolutely zero. Peel holdings is having major problems with capital and has been having to sell assets because of its heavy exposure to retail. How badly it is affected we have no idea because it is an offshore company which trades through about 500 interlinked companies. But trade reports are that they have clear difficulties. Here also there will be cultural and user changes. One of the biggest firms which flies out of the airport, Ryanair, has warned that its business model is bust if they have to leave flights with blocked off seats to preserve social distancing. Well not only will they have to do that but they will need to react to the market. Many people I know simply will be very reluctant to get into very highly congested areas in airports and airplanes for a long time.
Off course there will be upsides as well. That is why I am urging the Council even now to take a long hard look at the economic and cultural changes that will flow into the post virus world. If our city is to do well we must drop cherished dreams of the past and work up viable dreams for the future. The Council’s role in this will be limited. We will have huge financial difficulties ourselves and our ability to borrow has already been restricted by a huge increase in the cost of our borrowing from the Public Works Loans Board.
The sad fact is that we have to do two things. Firstly, we need to cope with the emergencies which are causing huge strain on many of our officers but where, in my opinion, we are doing well. Secondly, we need to find space to look at what we should be doing for the future. I have suggested on several occasions how this might be done but have had no response from officers or politicians within the Council.
The Cities and areas that will do well in the future are those who are forward looking, research oriented and capable. Our Council is beginning to look flatfooted and backward looking. I can only hope, on behalf of all of us, that this changes. If not, we will continue to have quality investors shunning us and will have to depend on more dubious investments and more dubious investment methodologies while Manchester and other cities continue to prosper!