“Unprecedented levels of 20-30% cost increase” are impacting on some projects in the £51 million Margate Town Deal and Ramsgate Levelling Up and Future High Street schemes.
The rising cost of materials and labour, which has been partly blamed on leaving the EU and the war in Ukraine, and the hike in inflation rates, are above contingency levels accounted for when government funding for the three major projects was applied for.
One of the schemes to be impacted is the Smack Boys building at Ramsgate harbour which, under the Ramsgate Levelling Up scheme, was earmarked to be converted into a training hotel and restaurant.
However, these plans have now been amended according to a report to Thanet council Cabinet members, which says: “Nationally the projects within these capital programmes are financially challenged due to the macroeconomic impacts of leaving the EU and the war in the Ukraine, which saw a huge impact on cost and access to materials and labour.
“In the last year the increasing inflation has compounded the already increasing costs. These recent economic events were unknown when the projects were submitted for DLUHC funding, therefore a reasonable level of inflation and contingency was included in the project submissions, however they did not match the unprecedented levels of 20-30% cost increase that some of the projects in the district are facing.
“There are a number of ways in which these can be dealt with. Firstly, for a new build scheme it is relatively easy to apply a value engineering principle, either reviewing the size and scale of the building or the materials being used.
“However, there is more of a challenge if the building is existing, of heritage value and listed, making scope changes and value engineering much more difficult to scale.
“One of the projects particularly being impacted by this is the Smack Boys restaurant with rooms scheme – it has to be amended on the basis of business viability due to the increase in costs for the refurbishment and repurposing of the building.”
Curl la Tourelle architects, based in London, won contracts in March which include works related to the restoration and regeneration of Pier Yard, The Clock House and The Sailor’s Church and Former Home for Smack Boys.
Thanet council’s Levelling Up Fund page says: “Currently, Curl La Tourelle Head Architecture are conducting feasibility studies to determine a new use for the building, whilst restoring and retaining its historical and heritage value as part of the Royal Harbour.”
Margate Digital, which received £6.3m for EKC Group to deliver a digital campus in the former M&S building in the High Street has also been delayed.
A 2024 opening date, around 12 months behind original estimates, has been blamed on delays in finishing building works.
In January Thanet council and EKC Group said: ““Since the bid was submitted, the economic environment has seen ongoing increases in inflation and the cost of living, and rising insurance premiums. Recent changes to the classification of Further Education Colleges by the Department for Education also have an impact. As a result the sums needed to cover these costs have increased.
“The council is engaged with central government, and is highlighting the challenges of increasing inflation and its impact on the cost of living and materials. The aim is to identify and mitigate the risks being posed to the project.
“Due to delays to the completion of building works, the proposed opening date for Margate Digital is likely to change. EKC Group proposes that the first cohort of students will now commence in September 2024. If completed earlier, the building may be used for other related activities.”
A stand-off over the contents of the grant agreement has also affected The Oval Bandstand and Lawns project in Cliftonville.
In June Grass (Gordon Road Area Street Scheme) Cliftonville, which is carrying out the project, said although allocated £500,000 from the town deal in 2021 and carrying out major works, the group was still waiting for £475,000 of the grant to be released.
That delay is not related to rising costs but instead to a row over the agreement that GRASS has to sign to get the money.
The highways element of the Ramsgate Future High Street Fund has also been delayed.
The scheme aims to make it easier for pedestrians to walk to the town centre from the Harbour, by reducing the dominance of the road. This project was due to be completed by spring 2024 but the funding has now been moved to the 2024/25 financial year.
A report to Cabinet members says: “It is mainly the highway element of the scheme which has been delayed. This has been caused by delays in the approval of the s278 agreement with KCC, these delays have also impacted on the coalition and review of contract documents due to the change in time period for the proposed works. As a result £1.867m has been slipped to 2024/25.”
Thanet council says the impact of cost increases and inflation is being reviewed with solutions being identified and sought out.
A report to Cabinet members says: “These include looking for further external funding, from public and private sources, reviewing options for individual projects of value engineering and considering other ways in which the projects can be delivered in order to deliver the desired outputs and outcomes.
“This work is ongoing with the project management, cost consultants and design teams, working with relevant stakeholders and has added time in the development of these projects.
“Funding applications are being drafted for the National Lottery Heritage Fund, Arts Council England and South East Local Enterprise Partnership. The council is also engaging with other government departments and agencies, the Thames Estuary Growth Board and private sector organisations.
“The Leader of the council has written to the Secretary of State for Levelling Up; Michael Gove, to highlight the challenges being faced by local authorities like Thanet District Council in picking up the macroeconomic impacts on the existing funding programmes.”
Due to Thanet council being one of 10 in the country to be chosen to take part in a Simplification pilot project the funding for all three schemes is now being treated as one pot. The scheme means there is also an additional year to complete Levelling Up and High Street projects with the deadline moving from March 2025 to March 2026.
Speaking at a Cabinet meeting last week, council leader Rick Everitt said local councils had not “been equipped to manage the level of capital funding awarded” and government timescales for completion had been “unrealistic.”
He said the same circumstances were faced by two other Kent councils which had received funding.
He said the new Simplification pilot, which streamlines reporting and management of projects, was “welcome” for giving “more flexibility” and allowing an extra year for delivery.
He also assured members there was no plan to move funding from Ramsgate to Margate or vice versa and if this did happen it would have to go through public council processes.
He added: “It’s an exciting time for all of us and I am certainly looking forward to the outputs and convinced we will have some really exciting developments over the next few years.”
The change of delivery deadline means Levelling Up Funded projects have been “slightly reprofiled” with funding plans moved to future years.
The project also means the Margate Town Deal Board will be disbanded and a new one set up for the combined scheme.
‘Extra year for completion’
A Thanet council spokesperson said: “There are three funding streams; Town Deal, Levelling Up and Future High Street Fund. They each support regeneration projects in the district. The Simplification Pilot means they can be managed more flexibly.
“This national pilot is a response to calls from local government to simplify these programmes. It will reduce the administrative burden on the council and allow for more focus on project delivery. It will simplify monitoring, reporting and project change arrangements.
“Following the invitation to be part of the Pilot, Levelling Up Fund projects have an extra year for completion. This brings them in line with the timing of the Town Deal programmes. This time is welcomed and will mean that we can deliver high quality projects for the benefit of the district.”
“The council is on track to deliver multiple regeneration projects by the deadline of 2026.
“We have been very successful in attracting significant funding into the area. This has resulted in a step change in the number of projects that the council is delivering. Together with the council’s housing programmes, it represents a total investment in Thanet of around £150m.
“We welcome the Simplification Pilot. By reducing the administrative demand we can increase the resources dedicated to the delivery of these projects.
“The impact of inflation is also a factor in these types of programmes across the country. We are working to ensure our projects are delivered to a high standard. Good progress is being made and we will continue to provide regular updates across all ongoing projects.”
Ramsgate Levelling Up Fund – £18.242m removed from the 2023/24 Capital Programme and moved to 2024/25 & 2025/26.
Margate Town Deal – £14.457m from the 2023/24 programme to 2024/25 & 2025/26
Margate Digital – East Kent College Group is reviewing the project in line with inflation and construction challenges, this has included a reprofiling of expenditure and the delivery timeframe. £4.891m has therefore been ‘slipped’ from the 2023/24 Capital Programme
Ramsgate Future High Street Fund – £1.867m has been slipped to 2024/25.