The leader of the opposition on Blackpool Council has questioned the wisdom of lending public money to private businesses after a high profile resort firm hit money problems.
Conservative councillor Tony Williams said the council should look closely at how it is using the council’s Business Loan Fund and at the underlying difficulties business in the resort are facing.
It is unfortunate that Viva has experienced a number of operational challenges to its business, some unforeseen, which are unrelated to road works.
He was speaking after entertainment business Viva Blackpool was forced to go into a Company Voluntary Arrangement to manage its debts earlier this year when it hit cash flow problems.
Bosses at Viva said its trade was hit by the town centre roadworks and bridge repairs putting off customers, together with teething trouble with its diner after one of its contractors itself hit trouble delaying the refurbishment work.
Among the creditors is the council which is owed £224,762 in rates and HMRC which is owed £131,287 but Viva bosses say the business is set for a good summer season with a raft of new shows.
The council also gave Viva a loan of around £100,000 to help grow the business and create jobs. It is not linked to the CVA.
Coun Williams said: “The danger of the council becoming money lenders to businesses is that not all will flourish and some will fail completely. Regardless of what assurances the council have in regard to repayment there will be some instances when it will be impossible to collect the debt outstanding. Borrowing money to try and prop up businesses in the town comes with a great risk especially when the council are doing nothing to fix the root causes as to why these businesses are struggling in the first place. The so called Business loan fund appears to be benefiting the council’s own businesses rather than those in the private sector.”
Leader of the council Simon Blackburn said: “One of the key priorities for Blackpool Council is to support regeneration and growth in the town. Loans are made available to selected businesses who meet specific criteria to support these goals.
“With any loan agreement there is an element of risk whether it be made through a bank or a council.
“However, it is encouraging that the default rate on council loans to businesses is currently 0.3 per cent which compares very favourably with industry benchmarks.
“We always seek stronger security conditions for larger loans and we have done so in this case as a result we are not adversely affected by the CVA.
“The council is owed less than half of the outstanding business rates as the majority is due to the Treasury. The CVA should return a certain amount per pound.
“It is unfortunate that Viva has experienced a number of operational challenges to its business, some unforeseen, which are unrelated to road works. Many businesses continue to operate profitably in this area.”
Roadworks hit club’s trade
Martin Heywood from Viva Blackpool said the CVA allowed the business to continue and pay off its debts gradually. He said: “We were hit by a set of events most of which were out of our control.”
He said in 2016 Viva had the chance to take over the former Harry Ramsden’s site below the showbar but had to pay extra for the refurb when a contractor working on it hit trouble.
“We wanted to develop the businesses and it created more full time jobs for local people.
“We had done a three year projected forecast for it but immediately had no choice but to pay out significantly.
He said the new business had just got on its feet when the roadworks started and customer numbers plummeted in the crucial Christmas period, despite largenly being an evening offering. He added: “It was major chaos and no-one was made aware just how bad it might be with three junctions affected at the same time.
“We engaged with the council and the other creditors from the start and people have been very good to us as they understand that in the long term this is a great business.
“We are not out of the woods yet but are now going forward again with some fantastic shows, it was just a short term issue.
“I had to put in £30,000 of my own money to make sure staff were paid and I myself am the second biggest creditor of the CVA.”