Leaked report shows Norwich City Council knew risk of £6m loan to wholly-owned Lion Homes a year before collapse
The city of Norwich, like many other municipalities, has been struggling to provide affordable housing to its residents. In an effort to address this issue, Norwich City Council established a wholly-owned housebuilder, Lion Homes, in 2015. However, despite the council’s investment of around £3.4 million and a loan of £6.1 million, Lion Homes has failed to deliver on its promises. In fact, the company has accrued losses of £5.72 million over several years, and it has been unable to repay the loan. Recently, leaked documents have revealed that the council was aware of the company’s financial struggles and the likelihood of it being unable to repay the loan almost a year before it entered liquidation.
The documents, which include a report by consultancy firm 31 Ten, highlight the council’s lack of oversight and poor governance of Lion Homes. The report found that the council’s shareholder panel, which was supposed to meet four times a year, had only met once in three years. Additionally, the report noted that the council’s objectives for Lion Homes were unclear and not linked to key performance indicators. The lack of separation between council officers and Lion Homes staff also raised concerns about potential conflicts of interest. These findings suggest that the council’s handling of Lion Homes was inadequate, and that the company’s failure was likely inevitable. The report’s warnings, which were issued in October 2024, were clear: Lion Homes faced a “funding cliff edge” with the £6 million loan due to be repaid in March 2025, and interest rates on any refinancing could double from 4.6% to 9.5%.
The consequences of the council’s actions, or rather lack thereof, are now being felt. The liquidation of Lion Homes has resulted in a significant loss of public money, with the council writing off the £6 million loan. Green Party councillors have been vocal in their criticism of the Labour-majority council, arguing that the failure of Lion Homes was a result of poor governance and a lack of transparency. Councillor Alex Catt stated that the council had been warned about the company’s financial struggles over a year ago, but failed to take action. The councillor’s comments are scathing, suggesting that the council’s handling of Lion Homes was characterized by “governance failure, wasted officer time, and the loss of millions in public money.” The fact that the board of Lion Homes was unable to meet for two months leading up to the company’s collapse due to a lack of members is a stark example of the council’s negligence.
In response to the criticism, Councillor Carli Harper, the cabinet member for finance and major projects, has attempted to downplay the significance of the loss, stating that the council had been transparent about the company’s finances and risks. However, this response rings hollow, given the council’s failure to address the issues raised in the 31 Ten report. The councillor’s claim that the council has been “financially planning to guard against financial risks” is also unconvincing, given the scale of the loss. The fact that the council is now planning to develop housing projects itself, rather than using a private firm, may be a positive step, but it does not excuse the council’s past failures. The council’s decision to bring housing development in-house is a belated recognition that the use of a private firm, in this case, Lion Homes, was not the best approach.
The story of Lion Homes serves as a cautionary tale about the risks of poor governance and the importance of transparency and accountability in local government. The council’s failure to properly oversee Lion Homes has resulted in a significant loss of public money, and it is likely that the consequences of this failure will be felt for years to come. The fact that the council is now planning to develop housing projects itself is a positive step, but it is essential that the council learns from its mistakes and takes steps to ensure that similar failures do not occur in the future. This includes implementing robust governance structures, ensuring transparency and accountability, and prioritizing the needs of the community. The council must also be willing to listen to criticism and take constructive feedback on board, rather than dismissing it.
In conclusion, the failure of Lion Homes is a significant blow to the city of Norwich and its residents. The council’s handling of the company has been characterized by poor governance, a lack of transparency, and a failure to address the issues raised in the 31 Ten report. The consequences of this failure will be felt for years to come, and it is essential that the council learns from its mistakes and takes steps to ensure that similar failures do not occur in the future. The council’s decision to bring housing development in-house is a positive step, but it must be accompanied by a commitment to transparency, accountability, and good governance. Only then can the council hope to regain the trust of the community and deliver on its promise to provide affordable housing to the people of Norwich. Ultimately, the story of Lion Homes serves as a reminder that local government must always prioritize the needs of the community and be accountable to the people it serves.
