FEATURES

Council borrowing nearly triples in three years as property acquisition and development loans mount

Freedom of information request reveals five paragraph “outline business plan” for £55 million Guildhall shopping centre investment.

Martin Redfern

Exeter City Council’s borrowing has nearly tripled over the past three years as it has made large loans to its property development company Exeter City Living, financed the construction of the £42 million St Sidwell’s Point leisure centre and spent £44 million purchasing the Guildhall shopping centre leasehold.

It has also bought office blocks including Senate Court in Southernhay Gardens, for which it paid nearly £10 million , and increased its Housing Revenue Account debt by borrowing an additional £15 million to finance the construction of social housing.

The council’s total borrowing from the government Public Works Loan Board facility, which provides loans for capital projects, stood at £168 million at the end of March this year, according to its unaudited 2021-22 statement of accounts. Its net budget for interest payments in 2022-23 is more than £2.6 million.

However its capital financing requirement, the amount it has an underlying need to borrow to finance capital expenditure based on its plans, is set to soar. The council currently expects it to nearly double over the four years to March 2025 to just over £300 million.

The council already owned the freehold of the 300,000 square feet Guildhall shopping centre when it decided to create a £55 million budget to buy the leasehold in October last year. The remaining £11 million is allocated for its redevelopment, although it says it has no plans to redevelop the site for the forseeable future.

The decision, which was supposedly made as “part of the Liveable Exeter vision”, may have breached local government transparency regulations as it was taken in private without sufficient notice.

Local authority borrowing via the government Public Works Loan Board facility to enable the acquisition of assets bought primarily for yield has not been permitted since March 2020. This change in policy followed an increase in councils using this lending facility to borrow money at lower than market rates to buy investment property purely for rental income.

In the three years to 2019 local authorities spent £6.6 billion buying commercial property – fourteen times more than during the preceding three years – of which as much as 90% was financed by borrowing. A National Audit Office report highlighted how some councils would be significantly exposed in the event of a recession or property market crash.

The city council, however, was given permission to use Public Works Loan Board financing to purchase the Guildhall shopping centre leasehold provided it uses surplus rental income for regeneration activity, even if not at the shopping centre site. It therefore intends to cover the £900,000 cost of demolishing the old bus station this way, having unsuccessfully bid for Levelling Up funding for the project.

The council has also transferred the leasehold of the shopping centre’s residential units to Exeter City Living to prevent tenants gaining occupancy rights as a result of the overall sale which could have later prevented the council evicting them “for asset management purposes”.

Guildhall Shopping Centre sale brochure Guildhall Shopping Centre sale brochure

The council presented a report on the shopping centre leasehold purchase to its executive committee in July. Like the decision to create the £55 million budget to buy the leasehold, the report was not published and the press and public were excluded from the meeting when it was discussed.

In the same way as it sought to delay its response to a freedom of information request for a report on its decision to pave the way for a 186-bed “co-living” block in Summerland Street, the council claimed that “the complexity and volume of the information” made it “impracticable” to respond to a freedom of information request for the Guildhall shopping centre report the within the time limits permitted by law.

Like the Summerland Street report, the council took two months to release the Guildhall shopping centre report, twice as long as allowed by law. It was also just three pages long, including redactions for which the council failed to supply the justifications required by law.

The report includes what the council describes as an “outline business plan for the asset going forward” which extends to just five paragraphs and makes vague propositions for which no supporting information or documentation is supplied.

These include the production of “an asset strategy to strengthen the [shopping] centre’s position as Exeter’s leading leisure, food and beverage and socialising destination” and the “possibility” of exploring “closer integration of management of the [shopping] centre and the Guildhall car park to enhance the continuity of the customer journey which should boost usage and coordination across the functions”.

The council also claims that “the asset presents a significant future opportunity to implement transformative change within the city centre, building upon the regeneration initiatives already underway and in the pipeline and contributing to the Liveable Exeter aspirational prospectus” and says “creating synergies” with the widely-criticised Harlequins co-living redevelopment (on which work has yet to begin) will be “fundamental to implementing successful step change”.

Subscribe to The Exeter Digest - Exeter Observer's essential free email newsletter

Your personal information will be processed and stored in accordance with our Privacy Policy

The report does not mention the high churn rate in the Queen Street flank of the shopping centre following its £12 million redevelopment in 2016. Only three of the original eight food and drink businesses have survived: three closed before the pandemic struck. The scheme’s promotional website can’t keep up: The Stable, which shut more than two years ago, still features, as does Absurd Bird, which closed more recently.

Nor does the report mention what the Financial Times described as Exeter’s “startlingly poor” in-person sales performance during the pandemic, or the Centre for Cities 2022 outlook report which found that Exeter had experienced among the highest reductions in bricks and mortar fashion retail sales in the country.

A recent sector-wide report by Knight Frank, the firm which marketed the Guildhall leasehold sale, found that the structural issues facing shopping centres were firmly in place before the pandemic, and that while shopping centre income from leisure spending has risen slightly, large falls in other areas have decisively offset it as part of an overall decline.

Meanwhile no-one should be in any doubt about the extent to which the UK’s economic crisis is likely to constrain the discretionary spending power of all but the most wealthy, even if the city council’s leadership were insufficiently informed this time last year to pause for thought before deciding to invest £55 million of public money in a retail and leisure destination.

As Harry Badham, who oversees development and asset repositioning for Hammerson, a major UK shopping centre operator, said in an interview earlier this year: “Anyone in any sector who denies there’s going to be change and thinks they can sit back and collect rent for fifteen years is going to be mincemeat”.


Democracy doesn't work when people don't know who is deciding what on whose behalf and what the costs and consequences of those decisions will be.

Exeter Observer is proving that reader-funded media can deliver the independent public interest journalism our local democracy needs.

Upgrade to a paid Exeter Observer subscription to support our work and get access to exclusive premium content and more.

More stories
Illustrative floor plan of new redevelopment proposals

New Heavitree Road police station student accommodation and “co-living” complex proposals submitted to Exeter City council

Application for full planning permission for 813-room scheme in seven blocks follows decision to reject previously-proposed 955-room scheme in two blocks which was subsequently upheld at appeal.

Danny Barnes

Danny Barnes received full £15,000 Devon County Council allowance during 2024-25

Heavitree & Whipton Barton councillor failed to sign off £14,600 community grants after attending only two of fifteen public meetings and is alleged to have worked for Scottish Labour MP Imogen Walker since shortly after last year’s general elections.

, updated

Exeter cycle route E9 Wonford Road bus gate modal filter

Wonford Road modal filter bus gate to be first of five Exeter ANPR camera sites

Devon County Council will use new moving traffic offence enforcement powers to issue penalty charge notices to motorists contravening active travel, bus lane and one-way street restrictions.

Devon five-a-day fruit & vegetable consumption by district 2023-24

Exeter residents eat lowest proportion of 5-a-day fruit and vegetables in Devon with only South Hams above England average

Public health report also finds three in ten Devon residents are physically inactive and nearly two-thirds overweight with new countywide health and well-being strategy due in autumn.

Save Northbrook Pool campaigners dressed in black outside Exeter City Council's offices on 24 June 2025

Labour councillors dive deeper into denial in decision to abandon Northbrook pool

Exeter residents mourn as council suppresses destructive consequences of creating St Sidwell’s Point complex that looms in leisure service shadows like a leviathan.

Devon & Torbay Combined County Authority draft local growth plan infographic

Devon & Torbay CCA keeps quiet about 2025-35 Local Growth Plan as it takes charge of regional development agenda

Combined County Authority privately selects unspecified stakeholders to co-author document setting out strategic priorities but with little of substance to say on addressing region’s structural challenges.

On Our Radar
St Thomas churchyard

SATURDAY 19 JULY 2025

Love St Thomas Summer Festival

New community event launches with live music, talks, workshops, stalls, refreshments and family-friendly activities.

ST THOMAS CHURCHYARD

Summer at the Quayside illustration

TUESDAY 29 JULY TO FRIDAY 29 AUGUST 2025

Summer at the Quayside

A month of free family activities including weaving, felting, doodling and drumming.

EXETER QUAY

Spork! summer special

THURSDAY 31 JULY TO THURSDAY 14 AUGUST 2025

Theatre in the Park

Exeter Phoenix hosts an al fresco summer theatre season featuring Shakespeare, spoken-word poetry, puppetry and physical comedy.

ROUGEMONT GARDENS