Arun District Council is set to borrow a further £3 million to cover costs of the Alexandra Theatre regeneration.
The initial budget for the project was £15,780,000 mostly funded by a £12.1 million central government levelling up fund (LUF) grant and £3 million contribution from the council.
The council’s planning committee at its meeting on Thursday, October 24, approved an additional £3 million to be added to the project budget.
Around £1 million of the funds is to account for additional project costs and £2 million as contingency money due to instability in the construction sector.
The £2 million will remain under direct control of the council rather than in the construction contract, which the council says will give it an ‘added layer of budgetary control’, but would risk any further contingency costs being placed on the council not the contractor.
Money is likely to be funded through borrowing and could see the council pay financing costs on top of the £3 million of £175,000 per annum, according to a report presented to the committee by council officers.
The report said the alternative to not approving the funds was to discontinue the project and take on the ‘abortive’ costs of paying back the LUF grant to the government and any fees incurred as a result.
It said plans had already seen some £1.7 million in value engineering to reduce the cost of the project, and that interest rates are expected to decrease, reducing costs further.
Leader of the Council Martin Lury (LDem, Bersted) told the LDRS it was ‘not an ideal situation’ to be in and he was ‘frustrated’ by the increase.
He said: “I don’t think this firm will go under, it’s just delayed [the project]. As soon as you delay things, costs tend to rise.
“I think generally people want to see something happen there, the worst thing to do would be to halt it now and say ‘we’re not going to bother with it any more’ because then you leave the Regis Centre in a state of disrepair, which is no good to anybody.
“We can pull out and do nothing and then Bognor gets no regeneration or we can bite the bullet and say we want to do this project and see this through.”
A graph provided to the committee showing the construction material price index from 2011 to 2023, shows a steep increase in price at the end of 2020 through to 2022 post the Covid-19 pandemic.
A report alongside the graph stated the UK construction sector has seen ‘record numbers’ of construction firms going out of business over the last few years, citing the collapse of Tier 1 contractor and prison builder, ISG, last month as an example.
“Significant increases in material costs affecting key trades, energy costs and ongoing market capacity issues continue to have a major impact on tender prices,” the report said.
“We have seen increased material costs as well as shortages in labour due to the conflicts in Gaza and the ongoing war in Ukraine and the attacks on shipping containers in the Red Sea.
“The ripple effects from the various global crises, set out above, will continue to impact projects for some time.”
According to the government’s Insolvency Service, construction firms made up 17.4 percent of insolvencies in England and Wales in August this year, with the industry seeing a 33.9 per cent increase in insolvencies over the year to August since 2019.
