Chesterford Research Park: Brexit Risk Threatens Council Finances

Saffron Walden Labour Party has questioned the wisdom of Uttlesford district council’s finance chiefs in committing £47 million of debt towards an investment in the Chesterford Research Park (CRP), via the council-owned subsidiary Aspire (CRP). They are neither spreading risk nor considering the effects of Brexit on the biotech and pharma sectors.

Labour warns that if the CRP starts losing tenants due to economic problems in these sectors, it will put in jeopardy the council’s long-term finances as well as the plans for the North Uttlesford Garden Village, which forms a crucial part of the proposed local development plan.

The annual directors’ report filed at Companies House in early September stated that “once the country has got past March 2019, the likelihood of new tenants coming to the park, with some requiring new buildings, will significantly increase.”

Following a fact-finding meeting between Saffron Walden Labour Party representatives and UDC cabinet member for finance Cllr Simon Howell and UDC finance officer Adrian Webb, who also serves as executive director of Aspire, party spokesman Daniel Brett said: “Uttlesford is wrong to have all its investment risk linked to one asset in one sector and we are extremely worried that their future plans seem to be more of the same initially, rather than spreading risk.

“UDC is basing its investment policy on a blind faith that everything will be alright in the end. It is incredible that UDC have, in the Companies House filings, reached completely the opposite conclusion to the conclusions of a report published in May by parliament’s Business, Energy and Industrial Strategy Committee on Brexit risks to the pharmaceutical industry. The committee concluded that the UK may become a less attractive place to launch new medicines, particularly with regulatory divergence, and found that ‘any small gains would be hugely outweighed by additional costs or the loss of access to existing successful markets.’

“There is a very real risk that businesses will quit the CRP, potentially leaving the council with a large hole in its finances and sending its plans for the North Uttlesford Garden Village into chaos. We were told that the average remaining length of tenancy is eight years, but we are concerned that some of the larger tenants approaching the end of their tenancies may plan to quit for Europe or other research clusters.

“There are also specific risks to CRP. It is likely to lose business to nearby Hinxton, where companies are likely to cluster around an expanded Wellcome Genome Campus. Unlike Hinxton, the park remains outside the proposed Oxford-Cambridge technology arc with Uttlesford excluded from potential infrastructural benefits.

“Astonishingly, the council is not only wedded to investing everything in CRP, it is considering buying Aviva’s 50 percent share and expanding the park in the future. This will involve more council debt committed to an increasingly risky investment. If Aspire starts to struggle with interest payments, the council will have to deplete its reserves and cut local services.

“Even if the risks were totally mitigated, Uttlesford has placed all its eggs in one basket and opted for a low return asset. The council could have achieved higher returns in other sectors. It continues to ignore the tremendous commercial opportunities offered by Stansted Airport.”

UDC decided three years ago to set up a subsidiary, Aspire (CRP), and loan it money to acquire a 50 percent stake in the CRP. The funds were raised by council borrowing from the Public Works Loan Board (PWLB) and other lenders at a low interest. Aspire would then repay the interest on the loan to UDC at a rate of 4% over the 40-year period of the loan, plus any dividends. The differential between the interest rate paid by the council and by Aspire is being used to plug the £2.5 million funding gap caused by the end of central government core funding and cuts in the council’s New Homes Bonus.