Major change for Birmingham's Smithfield project amid financial ‘pressures’

The huge “once in a generation” scheme will transform the former Birmingham wholesale market site into a landmark destination, providing homes, retail space, civic squares, a market complex, leisure facilities, a park and more.

The council said the city centre development would drive the city’s international standing and signify its “renewed energy, vigour and confidence”.

“[Smithfield] will provide homes that will support the city’s growth and radically enhance the city’s visitor economy, placing Birmingham at the heart of an economic renaissance of the Midlands,” an outline business case said.

But financial challenges are already having an impact on the project, with the council confirming a significant change to its proposed cultural offer.

In particular, the Art Shed cultural building and the Round House music venue is now set to be incorporated into a single building rather than two separate structures.

The outline business case revealed the change.

The council said it was done to reduce the funding requirement as requested by government-appointed commissioners, who were sent in to oversee the crisis-hit authority’s recovery after it effectively declared itself bankrupt in September 2023.

“To address the budget shortfall the council set a principle not to commit to any new prudential borrowing and to consider any new investment in regeneration projects on a case-by-case basis,” the outline business case said.

“In September 2024, the commissioners did not support the £209m EZ [Enterprise Zone] funding ask for the Smithfield proposal and requested that the EZ gap funding ask be eliminated or reduced to the minimum.”

The requested funding linked to the Enterprise Zone, which invests in projects and initiatives that drive economic growth, is now £172.8m.

The council said changes could not have been foreseen at the time of procuring development partner Lendlease and highlighted “wider, viability pressures” arising from the higher levels of inflation recorded during 2022-24.

The outline business case continued: “To assess if Lendlease’s proposal is still the most economically advantageous when compared to the final tenders of other bidders cannot be accurately and fairly benchmarked.”

It said other bidders would have also needed to change their proposals to respond to the “challenges” which Lendlease had faced.

“As such, with all things being equal, the council still considers Lendlease’s proposal as being the most economically advantageous bid,” it continued.

It also confirmed that Smithfield’s leisure offer was set to change too.

“The ‘big-box’ style leisure complex incorporating ‘Future Worlds’, an immersive digital edutainment playground, and the ‘Urban Adventure Playground’, an extreme indoor sports/activity playground destination, will no longer be offered,” it said.

The council said this was due to digital immersive experiences becoming more commonplace across UK cities while extreme indoor playgrounds were typically found out-of-town due to needing large footprint areas.

It said updated research advised against pursuing proposals for an urban adventure playground.

“The leisure offer will now consist of two smaller leisure provisions,” the outline business case continued.

Council facing £29m cost

Another recent twist in the Smithfield saga saw the council confirm the scheme could leave it facing a £29 million cost to meet the demand for extra school places.

“Additional requirements of Smithfield is likely to lead to the need for over 1,000 primary/secondary/early years/SEND places at an estimated cost in the region of £29.58m,” it said.

“At this stage, if the scheme is to progress, the council, as a worst-case position, will need to underwrite the costs of the education provision.”

The council acknowledged this would be “less than ideal”, saying it would increase the pressure on already “extremely constrained capital resources”.

With other planned schemes also set to increase the number of homes in central Birmingham, it said: “A more strategic approach to identifying the increased demand on service provision, including education, will now be required.

“Discussions on the future needs of the city need to commence.”

In a bid to minimise the impact on its resources, the council said officers would explore “all routes” for external funding.

The council added: “Education officers will continue to work collaboratively with the project team to plan effectively and ensure that school places are created in a timely manner as demand materialises”.

In the report, the authority also said developers agreed to provide 2,900 sqm of space for education as part of the housing provision.

“This position was accepted by planning on the grounds of scheme viability,” it said.

“However, following discussions with Education, it was determined the proposed education space – located beneath residential development – would not adequately support education needs and was therefore rejected.”

The Smithfield plans are set to be discussed at a meeting tomorrow, July 22, where cabinet members have been recommended to approve the use of Enterprise Zone funding.