How a Surrey council plans to plug more than £50m deficit in a development project

The flagship Weyside Urban Village (WUV) scheme, led by Guildford Borough Council, could see hundreds of new homes (40 per cent affordable) community buildings, employment space and improved infrastructure being built.

The £453m project was given outline planning permission in October 2021.

But the project has seen a mounting potential deficit. In May 2024, it was pitched at £50m and will have increased with inflation since.

The deficit was initially reported in January 2023, which the council attributed to “macro-economic factors” of inflation and high borrowing rates slamming the construction industry.

Officers have now outlined various options to plug the funding black hole for the council to consider, with a full decision to be made by the end of July 2025.

In the last two years Guildford council has sold some of its assets (those no longer used or not generating enough money) generating around £9m, according to the council’s chief financial officer, Richard Bates.

He said there are a few other bits in the pipeline but he expects £20m in total could “easily” be generated to help mitigate the WUV project.

The intended new leisure contract for the Spectrum, Lido and Ash Manor is also hoped to generate funds for WUV – for instance, paying for the Guildford depot.

Richard Bates, chief financial officer for the council, told the LDRS the updated contract arrangement means the new operator will manage its own utility bills and pay a higher management fee – both benefiting the council.

Mr Bates also said the new G-Live contract has also changed to generate income for the council to fund general cost pressures.

North Downs Housing is also now trading at a profit, so the money the council had previously set aside for outstanding interest payments can be put toward the project as a voluntary revenue provision.

The CFO said the project is “clearly the biggest risk” and still going to be a large financial risk for the council for probably the next ten years. “We’re still going to have to borrow another £180m to get us from A to B,” said Mr Bates.

He explained the project still has to deal with ongoing inflation, soaring construction costs, land and house prices.

But the CFO added: “We’ve got to the stage where we have enough things to take to the council that will help us mitigate the risk of the project as it currently stands.

Cllr Richard Lucas said: “We still have our arms around the situation.” The lead councillor for finance explained it is a big risk but it is being managed.

He added: “As the project goes on, because there is a lot of infrastructure provision in the early stages, the risk will reduce.”

Another option up the council’s sleeve for contributing to WUV is looking at how the Housing Revenue Accounts (HRA) can get involved with the 1,650-home scheme.

If officers can find an agreement which financially stacks up for the HRA to be part of, the council can get returns early.

The aim is to squash the deficit to zero before local government reorganisation takes into effect and Guildford council is merged into a mega authority in 2026-27.

If Guildford does not cover the gap, there will be an annual impact on the new council’s budget and it could have to cut services.

Deputy Leader Councillor Tom Hunt emphasised again that cutting the number of affordable homes is the absolute “last level to pull” in the development.

“It remains an option for the future but it’s not one that anyone wants to take,” he said.

Any reduction to the types of homes would require a planning application, taking a year to complete, and Homes England would also need to be notified that the original business case has changed.