Development company set up by Mid Devon District Council racks up debts of £21m 

A development company set up by Mid Devon District Council will stop trading after racking up a debt of more than £21m. 

Members of the council cabinet voted to recommend that the full council agrees that 3 Rivers Developments Ltd - formed in 2017 - should stop trading.

Councillors want a “soft closure” of the company rather than calling in administrators, as it offers a better financial return. Two of the company’s projects - St George’s Court in Tiverton, and Haddon Heights in Bampton - should be complete in the next six months.

3 Rivers Developments was set up to construct “high quality” homes while generating a profit for the council, but it was impacted by the pandemic and a deteriorating trading position due to a lack of sales at St George’s Court.

Councillors heard that with no projects in the pipeline, the company is facing a challenging future with rising interest rates and uncertainty in the housing market.

The council had loaned the company more than £21m and an annual sales turnover of around £3-3.5m is needed just to cover overheads.

In its 2021/22 and 2022/23 accounts, the council made provision for potential company losses of around £5.3m and it is likely further write offs would need to be made.

Councillors were asked to make an urgent decision following a report on the company by accountants Francis Clark. The report was put together after councillors rejected three variations of a business plan.

The full council will make the final decision on winding up the company on 6 September.

Credit: Alison Stephenson, Local Democracy Reporting Service