Government Property Agency lost £1.3m after mothballing Newcastle and Birmingham hubs

GPA’s annual report reveals seven-figure cost of curtailing plans to add new digitally enabled government facilities in two cities, but government claims that decisions will ‘ensure long-term value for money’

The Government Property Agency exited two plans for major new high-tech offices last year, costing the unit just over £1.3m , declarations in its annual report and accounts statement have revealed.

The GPA’s hubs programme aims to relocate civil servants from small offices into up to 50 large hubs characterised as the “most digitally advanced buildings in government”. Government has claimed that the opening of the hubs is already generating annual savings of over £170m annually through building closures in London alone. But the GPA has downsized its plans for the programme to reflect lower post-Covid office occupancy rates and, nine months ago, MPs described the plan as being “in disarray”.

According to its annual report, the agency incurred a constructive loss of £843,000 by ending the “Birmingham 3” hub project and a further £463,000 with the termination of the “Newcastle 2” project.

Birmingham already has two government hubs: 23 Stephenson Street, which is managed by the GPA, and HM Revenue and Customs’ hub at the Arena Central development 500m away. An HMRC regional centre for Newcastle is currently under construction at the city’s Pilgrim’s Quarter development. It is due to open in 2027.

The Birmingham 3 and Newcastle 2 projects would have been in addition to those bases for departmental officials. However commentary in the GPA’s annual report said: “The decision was made by ministers to terminate the projects after a review identified that they no longer aligned with strategic requirements.”

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The third Birmingham hub had been earmarked for a new building at the Arena Central development. While that project will not be going ahead, the GPA is looking at different options for a further hub in the city.

It is understood that, despite being labelled as a termination, proposals for Newcastle 2 have in fact been pushed back to the next spending review period.

A government spokesperson said costs incurred while “evaluating potential solutions” for the two hubs would ensure long-term value for money.

“We are committed to launching new government hubs in Birmingham and Newcastle,” they said. “Two hubs are already open in Birmingham, and a new HMRC regional centre is under construction in Newcastle. Government hubs are expected to deliver millions of pounds of economic benefits for local areas through increased footfall and spending from staff.”

The GPA is an executive agency of the Cabinet Office. It was established in 2018 with a remit to manage government offices and warehouses and also now leads on the hubs programme to relocate civil servants in new offices, often in city centres, away from smaller, older offices in towns.

The programme is targeting the delivery of around 30 hubs by the end of the decade – and potentially up to 50. It is also closely aligned to the Places for Growth programme to relocate 22,000 roles away from the capital by 2030.

Writing in the GPA’s annual report and accounts, which were published last month, chief executive Steven Boyd said 2022-23 had seen “significant” construction-cost inflation and major changes in the cost of borrowing.

“These factors have led to increased rent levels proposed by developers for long leasehold office buildings,” he said. “This has led us to re-evaluate our approach to acquisition for our hubs programme.

“In some cases, we have moved to a self-delivery approach creating a freehold asset utilising the lower cost of capital available to us through HM Treasury.”

Boyd said the GPA expected to invest £1.9bn in new government offices over the next five years.

In June, members of parliament’s Public Administration and Constitutional Affairs Committee said mixed messages from the government over flexible working and a lack of clarity about planned civil service job cuts were hampering the GPA’s ability to plan for future office-space needs.

They called on the Cabinet Office to provide a “definitive statement” of government policy on the flexibility civil servants should have around how often they must work in the office, as well as the size of headcount reductions the government is modelling.

In the annual report and accounts, Boyd acknowledged many of the GPA’s clients – which include departments and agencies – were still “wrestling with their future ways of working”.

Last year Boyd told the Public Accounts Committee that future government hubs would need 25% less floorspace because of the increased adoption of remote and hybrid working accelerated by the Coronavirus pandemic.

In the GPA’s annual report and accounts Boyd suggested the assumed 25% reduction in the space clients needed compared to their pre-Covid requirements was an overly cautious figure.

“It seems clear that further reductions in the space we need to hold to meet clients needs will be possible,” he said.

Jim Dunton

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