Work on the Blackpool Central project tipped developer over the financial edge

Blackpool Council says the setback does not affect its ambitions for the site

The Blackpool Central site

The firm which was supposed to be leading the £300m redevelopment of Blackpool Central hit financial catastrophe as a result of its involvement in the troubled site.

Manchester-based property developer Nikal Ltd was appointed to oversee the transformation of the former train station grounds into a world-class leisure facility. It completed work on a multi-storey car park which forms one aspect but collapsed into administration in November.

Blackpool Council says the setback does not affect its ambitions for the site and is already in the process of finding another developer to lead the project. This week, it announced it has appointed Birmingham-based DSM Demolition to knock down the old police station, courts, and joke shop on Central Drive

The main part of the site has sat empty for half a century and was once supposed to be home to a super-casino under plans during the New Labour government. Those fell through and while Blackpool South MP Chris Webb has floated the idea of building an arena there, the council wants to create a major complex with a hotel, restaurants and indoor theme parks.

The Blackpool Lead can now reveal it was Nikal’s work on the Blackpool site which pushed it from being in financial difficulty into complete collapse.

The first hit was rising cost forecasts for the future phases of the development before an additional £4.6m demand from its contractor pushed it over the edge.

Administrators Paul Stanley and Mark Weekes of Begbies Traynor detailed the financial problems felt by the once thriving company, which had enjoyed positive growth between 2015-20. However, the impacts of Covid-19 and Brexit led to aborted sales, more caution from investors, rising interest costs and more complex sales processes.

Over time, more issues were found with its existing developments and as a result the CEO and CFO both departed the business and a new strategy was put in place to focus on finishing existing jobs and then focus on Blackpool Central.

The administrators explain: "Completion and subsequent realisation of the existing developments started positively and by September 2023 there had been an internal group reorganisation which left Nikal and its subsidiaries with no external funding. At this time, phase 1 - the building of a multi storey car park of the Blackpool Central project was under way.

“However, it was at this time that the company began to experience issues. The remaining historic developments were those deemed to be difficult and which proved more problematic to complete and realise the expected proceeds.

“At the same time, revised projections for later phases of the Blackpool Central Project were showing the project not to be financially viable. This was as a result of cost inflation, high interest rates, and excessive risk factors. Blackpool Corporation acknowledged this and asked Nikal to suspend further work on the later phases.

“Meanwhile, the car park [..] had been completed and a sale agreed, however, the building contractor indicated in spring 2024 it would be claiming additional sums back from Nikal, with this claim totalling c£4.6m.”

The report explains the company had intended to run down all developments by the end of 2025, with no prospect of continuing any involvement in Blackpool Central. While the firm hoped to continue to fund its obligations to wind down in an orderly manner, it lost an adjudication process and was ordered to pay the £4.6m immediately. High court action was launched to recover the sum and the company, with no way of paying, entered administration.

Work is now ongoing to attempt to recover whatever funds can be repaid to those owed money by Nikal.

Meanwhile, the council says its plans for the site will continue and The Blackpool Lead’s analysis of the administrators’ draft state of affairs indicates the authority has not been left out of pocket.

Demolition work is expected to begin in early 2025 and is being funded by money awarded through the government’s Town Deal.

Reaffirming the authority’s commitment to the project, council leader Cllr Lynn Williams said: “Blackpool Central sits right at the heart of our plans to make Blackpool better for everybody. We’re committed to attracting a world-class leisure development that creates jobs for our local people, extends our tourism season to be all year round and supports our local economy to grow.

“In the last five years at Blackpool Central, we’ve made more progress on this site than the 50 years before it since the Blackpool Central train station closed in the 1960s, largely paid for by the private sector without risking council tax payer’s money.

“The road to regeneration isn’t always smooth but we will not stand still. We will continue our plans to demolish the courts and the police station early in the new year, in order to create a shovel ready site for a new leisure attraction.

“We have very high standards for the type of attraction which this site needs and any future scheme will have to match those ambitions. To deliver on that we need serious investors and we will be heavily marketing this opportunity to get that international calibre of attraction.”