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Bill Wiggin (North Herefordshire) (Con)
In July 2006, I was full of optimism as I stood on site at Leominster enterprise park when construction began. The park presented the opportunity to boost the local economy in Leominster, attract business and offer employment, three crucial targets needed by the town. At the time, I said:
“We have the greatest people, as well as the infrastructure in place, so we are all looking forward with hope and excitement to seeing a vibrant and successful business environment too.”
Eight years later, I have felt the need to call for this important debate because Leominster enterprise park has not delivered on its targets, yet I believe it still has that potential.
There are a number of reasons for that failure, including the direction taken by the owners of the park—first Advantage West Midlands, and now PxP and the Homes and Communities Agency—lack of investment in the park to attract new firms and a poor internet connection, compounded by the fact that the owners will not invest in fibre-optic broadband.
Fastershire, the project in Herefordshire to roll out fibre-optic broadband, aims by 2018 to deliver broadband speeds of 24 megabits per second and above for all who need it. However, I was shocked to learn that Fastershire is not coming to Leominster enterprise park. According to Fastershire, the park does not meet the necessary requirements. BT’s next-generation access team said:
“The cabinet has too few premises connected to it, rendering it too small to provide a return on the investment based on the costs of construction and ongoing running costs of providing a new fibre to the cabinet service”.
The best that BT can offer businesses on the park is the option to upgrade to fibre optic at a cost of £30,000. PxP and the Homes and Communities Agency have not offered any help. BT’s offer has been reduced to £23,500, but PxP still refuses to get involved.
As I am sure the Minister will know, businesses, particularly in rural locations, need fast and efficient internet access to compete in current markets. I heard this week of a company on the park whose internet connection is so poor that it is virtually impossible to run online sales demonstrations. The company is now considering taking matters into its own hands to improve its connection speeds, as others have done, but it can only try options that it can afford.
One firm has dualled two lines to receive double the connection speed, but that option comes with all the costs of a second line, additional hardware and the dualling itself. A second firm pays extra for EFM, or Ethernet in the first mile. EFM uses existing copper wires instead of fibre to connect to a local exchange and offers access speeds ranging from 2 to 35 Mbps. It has been confirmed to me that the park’s connection is mostly 4 to 5 Mbps, and it is claimed that businesses on the industrial estate situated opposite the enterprise park have double that speed.
PxP and the Homes and Communities Agency, as owners of the park, should be doing far more to attract business. Businesses will not be attracted to the site if it has a poorer internet connection than the rest of the town where it is sited. We could end up in the ludicrous situation of a commercial enterprise park having a 4 to 5 Mbps connection while fibre-connected areas of Leominster could theoretically have speeds up to 76 Mbps, or more than 300 Mbps where properties choose to pay for a direct connection to the cabinet, as some businesses will. That is totally inappropriate for an enterprise park.
PxP is a public-private property and development joint venture company between Langtree Group and the Homes and Communities Agency. Langtree invested £15 million of equity in the business, and the Government invested £15 million of equity and committed a £45 million secured loan. The Homes and Communities Agency claims that as PxP is not a public agency but a private business, all business decisions taken by the board must be founded on good commercial practices and cannot subsidise the private sector. HCA goes on to say that
“due to the recession and running costs of the business, the equity in the business has been substantially eroded and therefore the partners have suffered a substantial loss. PxP are now endeavouring to operate commercially to try and recover both the Government’s and Langtree’s investment.”
How? By doing nothing, keeping its fingers crossed and hoping for a miracle?
As I am sure the Minister will agree, enterprise parks are designed to assist development. Business plays an extremely important part in local rural economies in terms of investment and jobs. However, in the case of Leominster enterprise park, it is absolutely clear that it is serving only PxP’s own interests as the company tries to recover its losses. How can the Government stand aside and watch the millions that they invested being put on hold so PxP can make a financial return? Surely we should be seeking an economic or community return on the public interest in that asset. Public interest, in the case of PxP, seems subsidiary to its commercial interests.
Leominster enterprise park comprises 22 acres. I am aware that the park has suffered from a number of deals falling through due to finance. I have been contacted by a company called Powerline Services, a business desperate to grow and expand. In the last two weeks, Powerline has taken on an additional four staff. In March 2013, the company expressed an interest in a plot on the park. On 9 April, it requested further information, and then on 16 April it made an offer. On 9 May, Powerline was told that a board meeting was being held to discuss the offer, but that it might be unsuccessful due to a pending offer previously made for another plot incorporating the plot in which Powerline was interested.
Four days later, on 13 May, it was confirmed that Powerline’s offer for the plot had been rejected, so the company inquired into a second plot and made an offer of the full asking price of £75,000. On 17 May it received a proposed schedule of terms. On 20 May, the company confirmed that it agreed to the terms and was willing to pay legal fees should the sale not proceed. Between 28 May and 6 June, the offer was chased up. Contact was made again on 7 June, when solicitor details and full plans including site layout, elevations and materials were passed across. Powerline did not hear from PxP again until the end of August.
On 29 August, at a board meeting, PxP decided to review its strategy for selling off land and rejected the offer of the full asking price of £75,000. The Homes and Communities Agency confirmed that PxP was changing its strategy and was now solely considering sell, design and build opportunities instead of allowing individual companies to buy plots outright and do the design and build themselves.
A further letter that I received from the Homes and Communities Agency claimed that
“against a book value of £76,000 and sales fees equating to 15% of the purchase price, the board were unable to accept the offer, as in effect this would have resulted in a loss to PxP of £12,000.”
Powerline offered £75,000, the full asking price, for the site. How, in good faith, could Powerline have known that it would need to offer £12,000 over the asking price in order for PxP not to lose out? My constituents are not clairvoyant. If PxP was unwilling to accept the asking price listed for the plot, why did it list it in the first place?
Furthermore, Powerline was also not offered the opportunity to buy the plot for the almost £90,000 that would ensure that PxP would not make a loss. The company claims that it was blocked from attempting to buy the land at all. It was only when Powerline checked the website of the selling agent that it discovered that the plot was available as a design and build opportunity for £600,000.
The Homes and Communities Agency is aware that PxP is pricing companies out of the park. In a letter to Leominster town council in February 2013, which was sent months before Powerline’s problems, Margaret Allen, chief executive of the HCA, said:
“I’m aware that PxP has progressed a number of land sales on various plots on the estate, some of which have been successful and others for various reasons have not. I think this is a combination of reasons, some on the part of potential purchasers, but also unfortunately the requirement for PxP to generate sufficient receipts on sales of land to meet the loan repayment originally made by Advantage West Midlands, which becomes payable on disposal of land. I am worried the Park is becoming less and less desirable to any investor.”
However, HCA is not even getting the basics right. Early on, businesses on the park were promised that, subject to plots being sold, the park’s owners would arrange for adoption of the access road by Herefordshire council, but that has not happened. It means that PxP is currently responsible for street lighting bulb replacement, ironwork replacement, site maintenance of empty plots and road repairs. A few years ago, a number of businesses had to apply group pressure after all the drain covers were stolen and not replaced for months.
There have been further problems with ensuring that grass cutting and road repairs take place, with no provision in winter for the roads to be gritted, except for those around the police station, which has its own arrangements. There were also difficulties in getting PxP to act when unauthorised visitors moved on to the park. I am even told that businesses had to register their own buildings through the Ordinance Survey, and had to register individually with the Post Office, for postcodes, and with Google maps.
Compounding all the problems with PxP, the lack of broadband and the blocking of sales on Leominster enterprise park has been the role of Government officials. The situation gets worse. On 6 March, I wrote to the Secretary of State at the Department for Communities and Local Government about the park. That letter was transferred to the Department for Culture, Media and Sport, whose April response must have been lost in the post. In his response of 1 April, the Minister for Culture and the Digital Economy, said:
“I am afraid I am not able to comment on the substantive point you have raised in your letter regarding the performance of the owners of the enterprise park as this is a matter for DCLG to address.”
However, I subsequently discovered that a further letter I had sent to the Secretary of State at DCLG on 20 March had been mistakenly marked as an enterprise zone matter, which DCLG deals with.
Having waited several months for a reply, in May I sent a chasing letter to DCLG to try to elicit a response. Following further reminders that I sent in July, I finally received an apology from the head of ministerial correspondence at DCLG. He stated that DCLG should have transferred the letter to DCMS in March, because DCLG does not have policy responsibility regarding private companies’ conduct at enterprise parks. He copied in the private office of the responsible Minister at the Department for Business, Innovation and Skills—the Minister for Business and Enterprise —but expressed concern that BIS might not accept the transfer of the letters due to the period of time that had elapsed.
Following further e-mails to BIS in July, I received a response in August from the Minister. On 5 September, I replied to that letter, only to be told later in September that the letter had been passed back to DCLG. We should remember that DCLG had already claimed that this matter was not its responsibility. However, I am now told that DCLG has compiled a draft response for ministerial consideration and approval. Unfortunately, throughout the period of correspondence there appeared to be confusion among the relevant Departments; officials did not seem to know who had policy responsibility for Leominster enterprise park.
When I wrote to DCLG, it failed to take action for months and then concluded that it was not its responsibility and passed the matter to DCMS, which replied to tell me that DCLG should have replied. When I received a response from BIS and wrote back, BIS passed the matter on to DCLG. I am informed that DCLG will be sending a reply, but to date I have not received it. I am reluctant to cause the Minister who is here today further embarrassment, but it would appear that there is a lack of agreement about who has responsibility for this matter. Unfortunately, this confusion and delay merely conveys to the people of Leominster that their problems are not important to the Government. As the Minister will understand, such treatment is unacceptable.
It is because of the problems I have detailed that I called for this debate today. After seven years, I am bitterly disappointed that more progress has not been made. PxP has completely failed to ensure that a telecoms service provider was available to service businesses that wanted to relocate to the park. Although I have used Powerline as a typical example, I have received reports of other businesses that have struggled to buy plots on the site. Therefore, I am reluctantly forced to conclude that PxP may be banking the extra land. It is absolutely futile to give this land and public money to a private company that is blocking development, and the Government’s handling of the matter has been extremely embarrassing. The Minister who is here today has been let down by civil servants, and this matter is also an embarrassment for the people of Leominster. I want the Government to make a full review of PxP’s role as owner of Leominster enterprise park. If PxP is not prepared to help businesses on the site or develop the site further, it is about time that the Government took back control of this land.
Jesse Norman (Hereford and South Herefordshire) (Con)
I will be brief, because I am keenly aware of the passage of time in the short period that we have been allocated for this debate.
I congratulate my hon. Friend the Member for North Herefordshire (Bill Wiggin) on his masterly speech; he shone a pitiless light on the official incompetence of various Departments of State. I wish that the problems he described were limited to North Herefordshire, but I am afraid that that is not the case; the incompetence of PxP has made its way into South Herefordshire as well, and I will briefly explain how that is so.
In 2007, my constituent, Mr Jim Hardy of Aconbury Sprouts, leased a unit from PxP in the village of Ewyas Harold and borrowed significantly to do so, to expand the production of sprouted seeds in reaction to growing consumer demand. Through no fault of his own, that demand then evaporated, due to action by the supermarket multiples. Although he struggled on, unfortunately he found himself having to place the company in liquidation, after trading successfully for 26 years. The rest of his business was unable to support the borrowing he had incurred to meet the orders that he had lost.
Fortunately, from Mr Hardy’s point of view, there was another well-established and well-resourced business that was keen to take over his business as a going concern, but that process required rapid action, because, of course, taking over a business that is already functioning requires speed, to maintain continuity. Despite the best efforts of the liquidator and the prospective buyer, PxP failed to respond in a timely and flexible way, and the opportunity was lost. All Mr Hardy’s staff were made redundant and Mr Hardy’s equipment was sold off for a tiny fraction of what it would have been worth in situ.
To secure the lease, Mr Hardy had been forced to sign a personal guarantee and unfortunately that guarantee remains in place. Mr Hardy has subsequently made other attempts to sell the business. PxP has put no value on all the improvements and adaptations he has made to the unit; indeed, it has demanded that he remove them. A company in an adjacent unit has approached Mr Hardy to acquire his unit, which would remove any of the issues that PxP had raised with the original purchaser, but PxP has refused to discuss any possible sale with that company. In fact, the unit has been shown on PxP’s website as being unavailable to let, despite that being pointed out to PxP on several occasions. Now PxP is pursuing my constituent, Mr Hardy, for sums of money that will inevitably lead to his bankruptcy and the loss of his home, which is also his only source of income.
As Mr Hardy says, that is not appropriate behaviour. It is certainly not appropriate behaviour for an institution that is focused on regeneration but has given up large amounts of revenue because it has not allowed a number of transactions to take place, and that—after all—is 50% owned by a public body. However, I would go further and say that it is not appropriate behaviour for a private company either, and I am at a loss to understand how PxP can be allowed to penalise and pursue my constituent in this way over a period of time.
It seems to me that this example I have given provides a further data point about PxP West Midlands, and that if we join the data points the result is not flattering for the company.
The Parliamentary Under-Secretary of State for Communities and Local Government (Penny Mordaunt)
I congratulate my hon. Friend the Member for North Herefordshire (Bill Wiggin) on securing this important debate on the management of Leominster enterprise park, and the role of PxP and the Homes and Communities Agency in running it. I know that he has been in contact with the Department—in fact, with several Departments, as he has outlined—and with the HCA regarding the park, and raised issues that concern several of his constituents. I am pleased to have the opportunity today to debate the issues surrounding the enterprise park.
I apologise on behalf of officials if there has been any departmental ping-pong. I congratulate my hon. Friend on using an Adjournment debate to find the Minister who is responsible. I have listened to his concerns and I am happy to take them on board and work with him. I will outline why we are limited in terms of the intervention that my hon. Friend is seeking and hope also to give him some comfort, saying how we might be of some practical assistance.
The Government recognise the importance of enterprise parks in supporting business, boosting employment and encouraging local growth. Leominster enterprise park has brought jobs and industry to northern Herefordshire and is providing the infrastructure to support further growth in the local area. The Government are committed to helping drive economic growth through creating conditions that allow businesses to thrive, and projects such as enterprise parks are, as my hon. Friend said, key to this.
My hon. Friend raised a number of concerns about the manner in which PxP has been operating at the enterprise park, one of which is that it has been obstructing development through land banking. PxP has stated that it remains committed to selling land as long as it can generate an acceptable return and its activity at the enterprise park supports its position. Since being established in 2007, PxP has supported the sale and development of 22 of the 26 plots at the enterprise park, with more than 20 companies bringing in new business to the area, including Orphans Press, Pinstone Communications and Polythene Solutions Ltd. Most recently, local steelworker, Frank H Dale, has reached agreement with PxP to build a manufacturing unit of 100,000 square feet. The development of that new factory will, in turn, allow the business to expand while remaining in the local area, and it will keep 68 existing jobs in the town and will bring in 50 new highly skilled jobs. That company supplies steel for a range of uses, supporting investment and growth in commercial, retail and residential sectors. The decision by that company to relocate to the enterprise park is a clear sign that businesses are willing and able to purchase land on the site from PxP. Construction started in August and should be completed by May 2015.
Bill Wiggin
I fully understand why the Minister has gone down this route. I deliberately kept the Dale story out. Dale’s is a wonderful Leominster company that started building barns for agricultural use. I think that, if she digs a little deeper, she will find that the whole thing hinges on a supermarket development on its original site. Therefore, it is a little bit of a red herring in this instance.
Penny Mordaunt
I thank my hon. Friend for that. I am going to get to issues that my hon. Friend is concerned about. I am simply stating that there have been considerable successes in getting businesses into that site. In fact, 85% of plots at the enterprise park will be occupied, showing that PxP is open to doing business where it makes commercial sense. I recognise that my hon. Friend has brought to my attention certain issues that appear not to make commercial sense, but clearly if 85% of the plots are being taken something is working.
Land banking is in nobody’s interests, and as long as PxP receives a suitable figure for a site, it appears to be happy to provide space for a growing business. I understand that my hon. Friend wants more to be done. I understood that PxP was assisting in resolving the broadband issue and was making representations to BT in that regard.
The Homes and Communities Agency is committed to developing business in the local area and has met a number of local businesses to offer support and address their concerns. Individual discussions have been held with both Powerline Services and Thomas Panels and Profiles to try to make progress on their issues. I understand that, in one instance, they were signposted to additional funders and that, in another case, an offer was made. I recognise that there was a discrepancy in the funding required to pursue that offer.
Additionally, the HCA has been liaising with the local authority to discuss the management of the enterprise park. The head of the HCA’s midlands west team met PxP and the town council to discuss promoting the site further and to consider additional ideas to ensure successful delivery. Details of considerable activity and negotiations on the site were given by the managing director of PxP, and the HCA is providing the town council with regular updates on developments at the enterprise park.
I understand and am pleased that area representatives from the HCA are also planning to meet my hon. Friend in the near future, to discuss how further progress can be made at the enterprise park. An important part of the HCA’s role is to drive sustainable, balanced growth in all parts of the country. Enterprise parks are a key tool in driving this growth, bringing new business, skills and activity to local areas, and providing the infrastructure for businesses to succeed. The agency understands how important they are to local communities and wishes to see them bring the greatest possible benefits to their local areas.
To summarise, Leominster enterprise park will shortly be operating at 85% capacity and can be considered successful in providing exciting opportunities for new business in the area. Although I agree with my hon. Friend that it is unfortunate that the park has not yet reached full capacity, with the recent progress, I anticipate that, hopefully, we will see the remaining plots sold before too long. With conditions continuing to improve, I am optimistic that the people and businesses of Leominster will benefit from that progress. I hope that my hon. Friend will continue to work with my Department and it, in turn, will ensure that the HCA does what it can to promote the site and work with local businesses to assist in progressing further sales.
Fundamentally, we are limited in what we can do to intervene. The influence of the HCA is limited and it has a duty of care to PxP when discharging its duties as directors. However, both my hon. Friend the Member for North Herefordshire and my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) have highlighted a number of practical steps that would, if they could be brought to fruition, certainly help promote the site.
I am glad that my hon. Friend the Member for North Herefordshire has a meeting planned with the HCA. I will be pleased to keep in touch with him on that matter and to look and see if we can progress the issues he mentioned about broadband and the facilities on the site, to ensure that this enterprise park’s reputation remains high.
I congratulate both my hon. Friends on this debate. Not only have they identified the Minister responsible, but I hope now that we will have an action plan to chase down any remaining issues. I am optimistic that we will get a site that will be at 100% occupancy.
Question put and agreed to.