Truro’s Pydar regeneration: we have no idea how much it’s going to cost, admits Cornwall Council, saying original concept is now “undeliverable”

Posted By on 23rd April 2024

By Graham Smith

The latest official estimate of Truro’s Pydar regeneration is “more than £200 million” and likely to increase, according to a Cornwall Council Freedom of Information answer.

The figure is based on 2023 construction costs and is in line with background briefings to Cornwall Reports that County Hall has for several months been expecting to spend more than £220 million by the time the scheme is complete.

Among the assumptions made by the council’s economic development department are that annual inflation in the construction sector in the years ahead is likely to continue at between 2.8% and 3.5%.

If correct, this will add £19.2 million over the next four years – but the assumption appears unduly optimistic.  Last year the UK saw average inflation in the construction sector of 4.1% with most analysists forecasting 3%-3.8% this year before settling at an average of around 3.5% over the next four years.

This means that construction sector inflation alone is likely to take the cost of Pydar to £235 million by 2027.  Even the first phase is not now due to complete before 2030.

It seems fair to assume that the total bill is rising at the rate of £5 million - £10 million per year simply because of inflation.  The longer it takes to build something, the more expensive it will be.

More serious is the volatile cost of borrowing.  The council’s FOI answer says that a 1% increase in interest rates would add £17 million a year to the cost of the project.

Interest rates are in fact forecast to fall by around 1% over the next two years but are subject to enormous political pressures, particularly in an election year.

Several banks and building societies actually increased the cost of borrowing yesterday (Monday) albeit by only 0.1%.  Barclays raised mortgage rates twice in seven days.

The FOI answer insists that the council remains committed to including 35% of its residential Pydar scheme as “affordable.”

The current “masterplan” is for 360 homes.  There were also going to be 473 student flats, a hotel and 4,600 sq metres of retail and commercial space.

The revised “masterplan” will be reported to the council’s cabinet when it is ready – which might not be for many months.

“The cost and masterplan is based on a scheme that we now know is undeliverable due to changes to legislation,” says the FOI answer.  “We therefore intend to undertake design works to determine an adjusted masterplan and associated development costs and report back to cabinet with this revised information in due course.”

The “changes in legislation” are the recent Building Safety Act which introduced new regulations.  Those new regulations stemmed from the Grenfell Tower fire disaster of 2017 and have been well known to the construction industry for several years.

The FOI offers other insights in the assumptions behind Pydar.  “The modelling has always included inflation at industry forecasted rates,” it says.  “However the project has been hit by the unprecedented ‘double digit’ inflation  experienced between September 2022 and March 2023.

“This was not forecast by the industry and has therefore escalated project costs to over £200m and we will look to curtail the project costs via value engineering and adjustment of proposed uses as part of the future design works.”

The FOI admits that any estimate of the final bill for Pydar will be “erroneous and misleading.”

“It is recognised that the proposed content of the masterplan will substantially change and so will the estimated construction value.” it says.  “The total cost is also very volatile to market changes with a one percent change to borrowing costs having a £17m change to the overall development costs.

 

Cornwall Council:  "Any quoting of the perceived total development cost will be erroneous and misleading"

“Therefore until this design work has been completed and the market stabilises, any quoting of the perceived total development cost will be erroneous and misleading.

“Once design work has been completed we will report back to cabinet accordingly.”

Despite huge political pressure to make progress, Pydar seems doomed to remain a huge hole in the ground until at least the general election.

You can download the full FOI questions and answers here:Pydar costs FOI

grahamsmith@cornwallreports.co.uk

This article has 4 comments

  1. Pie in the sky is not nutritious, one cannot help but wonder why it is such a regular feature on the Kremlins bland menu?

    Perhaps a change of kitchen personnel is needed?

  2. Why, on Earth, doesn’t Cornwall Council hedge the interest rates on long-term building projects to, at least, seal the cost of borrowing over projects? Surely, they are aware of this practice?

    • The answer appears to have been an ideological preference for Private Finance Initiatives over the Public Works Loan Board, abolished in 2020 to become part of the Treasury’s National Loans Fund. The debt could be “nationalised” and controlled any number of ways. But that would be contrary to the original premise behind Treveth, set up by the former Liberal Democrat-Independent administration to lever in money from the private sector.

  3. Why oh why did the stupid ones knock down the car park and create the hole? It’s all very well trying to work out costs to include inflation but if Cormac are going to have anything to do with the build the figure should be at least doubled or even tripled to cope with their usual overspend!

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