North Yorkshire Council
Executive
16 September 2025
Brierley Homes Independent Review
and Funding Update
Corporate Director
Resources
1.0 PURPOSE
OF REPORT
1.1 To
report to Executive the outcome and recommendations of an external
independent review carried out in relation to Brierley Homes on
behalf of the Shareholder, and
1.2
To request additional loan facility
headroom approval to Brierley Homes of £2m at the market rate
of interest of 6% above base rate, such facility to be reviewed
after 6 months to ensure Brierley Homes has appropriate cashflow
over the short term. Any draw down on this additional loan facility
would be subject to evidence of need and approval of the Corporate
Director Resources in consultation with the Leader, Deputy Leader
(Executive Member for Finance) and Chief Executive.
2.0
SUMMARY
2.1
Following a request by the Shareholder through the Brierley Group
meeting, an independent external review of the operating model,
structure, financial position and resilience of Brierley Homes has
been carried out. This was undertaken by Tony Dodds consulting and
the findings were reported to Brierley Group in July 2025 and
Executive at this meeting. Tony Dodds is a real estate professional
with over 30 years’ experience working in the land use
sector, with a strong emphasis on residential development. He has
set up and led two local authority owned trading companies in the
UK engaged in providing new homes both for market sale and for
affordable purposes and therefore has the appropriate skills and
experience to carry out the review.
2.2 It was
acknowledged as part of commissioning this review that further work
was also required over the next few months to prepare for a
possible extension of the loan facility headroom which would be a
decision of the Executive.
3.0
BACKGROUND
3.1
Brierley Homes was set up in 2017 by
the then North Yorkshire County Council to deliver homes for market
sale with the profits to be reinvested into frontline services. The
company also delivers wider shareholder value for the Council in
respect of the profits generated but also loan interest and service
level agreements from the Council.
3.2
After initially delivering homes
only for market sale, Brierley Homes has continued to gain momentum
in securing a positive pipeline of over 500 homes with over 200 of
them being affordable with estimated delivery for all in the next 4
years. Brierley Homes has enabled the grant of £2.6m for a
49-unit affordable scheme at Broomfields, to be secured with the
continuation of working relations with Broadacres and the NYC
housing team. The confirmed pipeline is made up from all NYC
existing sites. Brierley Homes future development profile includes
a shift in strategy for forward profiling to where they are
delivering 100% affordable homes under contracts with monthly
payments. This will improve their ability to predict income more
accurately and will have a positive impact on cashflow once this is
in place.
3.3 In terms
of the financial performance of the market sale homes, as with any
new company it has taken time for Brierley Homes to establish
itself. The company has endured a difficult initial trading period
with global impacts, some disappointing contractor performance and
some cost overruns, project delays and an erosion of profits. Due
to this, an independent external review of the company was deemed
appropriate and timely by the Shareholder, the outcome of which is
detailed below. In parallel to this review, there is now more focus
on sites being delivered within timescales with Brierley Homes
reviewing and improving structures and systems with more certainty
being provided over delivery programmes and costs. On this basis
the financial position of the company is projected to improve in
25/26 and beyond.
4.0 DETAILED
PRESENTATION OF THE SUBSTANTIVE ISSUE
4.1
Brierley Homes has delivered to date 100 market sale properties and
19 affordable homes. The Company has a business plan which is
updated annually with the latest 5 year business plan issued in
March 2025 with a further programme of 55 market sale homes and 43
affordable homes delivered in the 2025/26 financial year. The
following 4 year life span of the plan relates to a further 124
market sale and 154 affordable homes demonstrating the business
plan shift to deliverable cash based projects and a move away from
100% market sales. The current business plan utilises this delivery
model to also allow 100% affordable schemes to be delivered,
notably sites at Broomfield and Whitby. Brierley Homes involvement
in this method of delivery of affordable schemes has allowed grant
funding to be secured and planning permission for the delivery of
49 Affordable Eco homes has been secured. The current business plan
profile has 3 projects of this type and currently a further 3 in
feasibility stage. The business plan states that these cash flow
positive projects will become essential in the current market to
allow a robust management of Brierley Homes financial
position.
4.2
In the current business plan, Brierley Homes have also revised
schemes to include only market sales homes of a suitable size that
the opportunity would be available for the homes to be sold as
affordable homes thereby providing an exit route for any project
should there be a downturn in the market. During the current
trading year the market has slowed and Brierley Homes consider the
current strategy including all the above mentioned strategies will
allow effective management of the current financial position and
provide a robust pipeline with confirmed sales income dates. The
Market will fluctuate over time and this structure will allow
Brierley Homes to react accordingly in order to balance cashflow
through income from affordable homes sales with profit from market
sales as the market strengthens.
4.3
Some uncertainty on timing of sales income has effectively
constrained cashflow making short term planning difficult as
expenditure is relatively linear and predictable but income from
property sales is uneven and not controllable within short time
scales. There is therefore an ongoing risk when Brierley Homes is
at the ceiling of its loan facility that if delays to sales happen,
many of which are outside of the company’s control, there
could be an adverse impact on the company’s ability to pay
its supply chain and other invoices due in the short term, hence
the requirement for additional loan headroom.
4.4
Brierley Homes core business remains the delivery of homes for
market sale. Brierley Homes have plans for a pipeline of sites over
the next four years. Given the fluctuating nature of the timing of
sales income it is possible that additional funding in the region
of £2m is required to deliver these sites. It is proposed that
a facility is agreed for up to that sum to be provided to Brierley
Homes from NYC at the usual market rate of 6% above base rate. It
is proposed that this facility be drawdown upon with the agreement
of the Corporate Director Resources in consultation with Leader,
Deputy Leader (Executive Member for Finance) and Chief Executive
and is reviewed after the initial 6 months. This funding would be
in addition to the £25m commercial loan facility currently
granted to Brierley Homes and which Brierley Homes have now
utilised £24.5m of to deliver its pipeline of schemes,
bringing the total commercial loan facility to £27m. It is
also in addition to the £1.4m loan facility granted in July
2025 to deliver affordable housing above policy.
4.5
Independent external review
4.5.1 As summarised above, the
Shareholder requested an independent external review of the
operating model, structure, financial position and resilience of
Brierley Homes be carried out. This was undertaken by Tony Dodds
consulting and the findings were reported to Brierley Group in July
2025 and Executive at this meeting. Tony Dodds is a real estate
professional with over 30 years’ experience working in the
land use sector, with a strong emphasis on residential development.
He has set up and led two local authority owned trading companies
in the UK engaged in providing new homes both for market sale and
for affordable purposes and therefore has the appropriate skills
and experience to carry out the review.
4.5.2 The following areas were
covered by the review:
I.
A review of the operating model of
the company and its resilience.
II.
A review of the structures and
decision making. This should include looking at the permanent
establishment and the short term/ agency staff
III.
Its financial position in the short
and medium term. So, covering cashflow and profitability of the
pipeline and also development margin
IV.
Options going forward: continue to
build out the pipeline and wind up, extend the pipeline to pay back
the loan and then wind up, continue to develop the
company
V.
Is the model of operation of
delivering market facing homes for profit the right one, or does
the company model change to one of delivering affordable homes /
difficult sites given we are now unitary
4.5.3 The review concluded
that:
“Brierley Homes is a business that is
based on a sound operating model and an achievable goal, that of
building new homes for profit. It has diversified and adapted, now
building a high proportion of affordable homes and delivering
construction in different ways.
It has endured a difficult initial trading
period with global impacts, disappointing contractor performance
and some poor project management leading to cost overruns, project
delays and an erosion of profits. It now faces high debt levels,
delays in crystalising Shareholder Value and criticisms for its
unpredictable performance.
Despite this the company is delivering high
quality projects with a pipeline and forecast to deliver
Shareholder Value over the medium term. Structures and systems are
being improved, and more certainty is being provided over delivery
programmes and costs.
Further efficiencies are required, for example
to the delivery team itself, which requires additional support and
a clearer structure. Sales strategies need more robustness and
improvements to the transparency and accuracy of information being
exchanged with the shareholder need to continue. Development
margins need reviewing and the way sites and land values are
appraised aligned more to the proven methodology of the private
sector.
The company also needs flexibility from its
shareholder with respect to the development loan used to support
its activities. Beneficial changes can help the company return to a
more stable and sustainable financial trading position sooner,
allowing more new projects to be delivered and greater Shareholder
Value to be created.
The shareholder also needs to support the
business as publicly owned commercial entity as it interacts with
other parts of the Council. Making business decisions in its
own interests can lead to conflicts which need careful handling to
ensure optimal results for all parties.
The new homes market in North Yorkshire has a
positive outlook but remains affected by macro-economic influences.
Careful planning is required to achieve sales at acceptable values
and rates, with a focus needed on building homes that people want
to buy, in good locations, with alternative exit options available
as a back-up. Continued investment into delivering affordable homes
under contract to third parties should be encouraged as a cash
efficient and low risk part of the business model.
Similarly proper project planning and assessment
is vital to ensure that unnecessary costs and delays are avoided.
Early evidence suggests that the new construction delivery methods
are proving successful and with inflation easing the ability of the
company to deliver projects to budget and on time looks
promising.
The quality and specification of the homes BH is
producing is excellent and exceeds the market. Build costs are
broadly market comparable and programmes for delivery in line with
expected rates of output. Legacy issues on current sites are being
reconciled and the lessons learned applied positively to new
schemes.
The brief for this report asks if the
operational model for BH is still appropriate or are there better
alternatives. In answer, there is no reason to cease the trading of
BH or change its current operating model, nor are there any other
models that better satisfy achieving the goals of the
shareholder.
The company has a positive impact on the County
in addition to its core aim of generating Shareholder Value. These
benefits are varied and tangible and BH can continue to provide a
valuable contribution to the economy and environment of the
area. “
4.6 Building
on these conclusions, the following recommendations were
raised:
·
Review of the loan
terms – give some
flexibility which will allow the company freedom to trade in a more
stable financial environment
·
Use a private sector funding
structure – loan up
to 70% of direct costs for projects, cashflow each project
separately, pay off debt and interest with initial sales
income
·
Change the project
appraisals –
increase the KPI development margins and use updated residual land
value calculations
·
Support the team
– rationalise the structure
and recruit for improved management, resilience, less freelance
contracts and to plug the in-house skills gaps
·
Update sales
strategies – plan
for an alternative exit, look at sales rates and values, allow for
incentives, avoid unpopular house types
·
Review Council / Company
interaction – look
at issues that may affect the operation of the business where it
interacts with the shareholder
·
Business Continuity
Plan – produce
one
·
Update criteria for Shareholder
Value – promote the
true and fuller benefits of the company
·
Overheads and administrative
costs – review
these including the role of SLA’s
·
Accounts – report balance sheet as well as profit
and loss to reflect WIP and stock to give a truer picture of
company health
·
Affordable Homes
– develop relationships and
encourage delivery of further cashflow friendly build
contracts
·
Information production
– continue to improve the
detail and accuracy of data to inform all parties of trading
position
4.7 These
recommendations have been considered by both the Shareholder and
the company with the responses and actions from these
recommendations set out below:
|
Use a
private sector funding structure – loan up to 70% of direct costs for
projects, cashflow each project separately, pay off debt and
interest with initial sales income
|
In principle
this is agreed. It is accepted that the current market rate charged
of 6% above base rate is an appropriate market rate for market sale
houses. It is proposed to review the value of the loan which is
attributable to delivering affordable homes above policy and it was
agreed as part of the urgent July 2025 decision that this element
of the loan would be separate to the main loan for the company and
would not attract a commercial rate of interest, instead it would
be at base rate to recognise the social benefit of delivering the
affordable homes. Loan of £1.4m has been used to date on
affordable above policy with plans for additional affordable homes
in the pipeline.
|
|
Change the
project appraisals – increase the KPI development margins and
use updated residual land value calculations
|
This is already
in progress. A review of margin is being considered to ensure it is
in line with the industry.
|
|
Support the
team – rationalise
the structure and recruit for improved management, resilience, less
freelance contracts and to plug the in-house skills gaps
|
A review of the
structure is taking place. This will pick up the split between
Brierley Homes staff and freelance staff and make the whole
staffing structure less linear. The cost implications of this need
to be worked through.
|
|
Update sales
strategies – plan
for an alternative exit, look at sales rates and values, allow for
incentives, avoid unpopular house types
|
Already being
progressed. New sales strategy in place with a sales post
appointed. Alternative exit route of shared ownership being
considered as part of business cases and sales strategy along with
work with the councils housing department for any homes that are
not successful at market sale. Other incentives also being
considered by the company such as stamp duty payment and some
research being done as to what the rest of the industry is
offering. Unpopular house types have already been identified and
company is no longer offering.
|
|
Review
Council / Company interaction – look at issues that may affect the
operation of the business where it interacts with the
shareholder
|
Issues are
being addressed particularly with planning and highways departments
to understand issues from both Organisations’
perspectives.
|
|
Business
Continuity Plan –
produce one
|
This will be
developed to be complete by December 2025.
|
|
Update
criteria for Shareholder Value – promote the true and fuller benefits of
the company
|
This is
currently the loan margin and 10% of the SLAs. The definition of
shareholder value and social value will be considered in
future.
|
|
Overheads
and administrative costs – review these including the role of
SLAs
|
This is being
addressed as part of the work on structures and margin set out
above.
|
|
Accounts – report balance sheet as well as profit
and loss to reflect WIP and stock to give a truer picture of
company health
|
Agreed this
would improve financial reporting and is the direction of travel.
Full financial information including P&L, balance Sheet, work
in progress and Cashflow are prepared and reconciled at year end
and so a full picture of the company is available. The intention is
for Brierley Homes to move to a new finance system following NYC go
live on 1 April 2026 and so this will be picked up as part of that
project.
|
|
Affordable
Homes – develop
relationships and encourage delivery of further cashflow friendly
build contracts
|
This is in
place and is something Brierley Homes will look to build on in the
future. 2 fully affordable schemes commence on site in August with
monthly income associated with this and a further 3 fully
affordable schemes in the development pipeline. Brierley Homes are
working with a registered provider and need to continue developing
the conversation with the council’s housing team to start
developing homes to support the HRA. The availability of additional
grant funding to deliver such schemes will also be
explored.
|
|
Information
production –
continue to improve the detail and accuracy of data to inform all
parties of trading position
|
Significant
progress in this area with the build and sales tracker and weekly
cashflow both of which are updated weekly and shared with team
members weekly and Board as appropriate. This has greatly increased
visibility of what income is to be received and the amounts and
timing of payments. The detail included and the accuracy of these
documents will continue to be refined.
Sales income in
year is also now fully detailed with risk included so that this can
be tracked and issues highlighted early. Relationships between
different teams have also developed with better joint
working.
|
4.8
Based on this review, there is support for the Council to continue
with the Company as set out along with ensuring improvements, as
per the recommendations, are progressed.
5.0
ALTERNATIVE OPTIONS CONSIDERED
5.1 There is
an option not to approve any additional loan, but this runs the
risk of some payments being unable to be made if there is any delay
in sales income being received and the development pipeline of
Brierley Homes being constrained.
6.0 IMPACT
ON OTHER SERVICES/ORGANISATIONS
6.1 There
was no impact on any other services or organisations.
7.0
FINANCIAL IMPLICATIONS
7.1 The
company reported a draft outturn position as at 31 March 2025 of
Gross Profit £0.05m and a Net Loss of £3.2m, after taking
account of £2.3m financing costs and £1m overheads. This
result was driven by delays in receiving sales income for a variety
of reasons. Processes have been implemented to ensure stronger more
robust procedures and governance is in place to support the
development of Brierley Homes going forward. The draft forecast
outturn for 25/26 as at quarter one is a profit of £0.3m with
this rising to £3.2m in 26/27. Shareholder value in 25/26 is
forecast to be £1.9m. The Business Plan provides for gradual
repayments to be made on the loan.
7.2
The following statement was included in the independent report in
terms of the pipeline and loan repayment: “An assessment of
the current pipeline projects suggests that over the next 4 years
trading through these schemes can enable BH to repay almost all of
the principal debt whilst also covering the company overheads and
making the necessary loan interest payments.”
7.3 The
income from sales forecasts at the time of the 21 July 2025 urgent
decision report was for £4.724m to be received by the end of
August. At the time of writing, £3.27m of this income has been
received. The remaining income is due in during September / October
in line with some movement in sales completion dates.
7.4 The
Council has an existing loan facility to Brierley Homes of
£25m at a commercial rate of interest and, following the
urgent decision on 21 July 2025, an additional loan facility of
£1.4m to deliver affordable homes above policy. This loan to
deliver affordable housing is at base rate of interest to reflect
the social benefit to support the delivery of affordable
homes.
7.5 The
additional loan facility to deliver market housing of £2m is
proposed to be at a commercial rate in line with the existing loan
and would therefore provide additional shareholder value for the
Council. It is proposed that any draw down on this loan facility
would be delegated to the approval of the Corporate Director
Resources in consultation with the Leader, Deputy Leader (Executive Member for
Finance) and Chief Executive.
8.0 LEGAL
IMPLICATIONS
8.1 The
proposed loan does not meet the criteria for a subsidy because it
does not confer an economic advantage, as it aligns with the terms
available in the market.
9.0
EQUALITIES IMPLICATIONS
9.1 There
are no specific equalities implications arising from this
report. See Appendix A
10.0 CLIMATE CHANGE
IMPLICATIONS
10.1 There are no specific climate change impacts
arising from this report. Brierley Homes houses are built in line
or above current policy. See Appendix B
11.0
REASONS FOR
RECOMMENDATION
11.1 Additional loan facility
is required in order to potentially allow the company time for
sales to be received over the next few months and ensure Brierley
Homes can continue to make all payments due to suppliers in the
event of some delayed sales in the coming months.
12.0
RECOMMENDATIONS
12.1 For the
Executive to note the conclusions and recommendations of the
independent external review that has been carried out.
12.2 For
Executive to approve additional loan facility headroom to Brierley
Homes of £2m at the usual commercial rate of interest to be
reviewed after 6 months to ensure Brierley Homes has appropriate
cashflow over the short term. Approval of draw down on this
additional loan facility to be delegated to the Corporate Director
Resources in consultation with the Leader,
Deputy Leader (Executive Member for Finance) and Chief
Executive and is subject to evidence of need being
demonstrated.
APPENDIX
Appendix A
– EIA
Appendix B
– CCIA
BACKGROUND
DOCUMENTS: None
Gary
Fielding
Corporate
Director Resources
County
Hall
Northallerton
5 September
2025
Report Author
– Vicki Dixon – Assistant Director - Resources,
Environment
Note: Members
are invited to contact the author in advance of the meeting with
any detailed queries or questions.
