Pros and cons of Borders council's £10 million estate deal revealed

CONTINUING OUR COVERAGE OF THE PURCHASE OF LOWOOD ESTATE

The members of Scottish Borders Council who sanctioned the £9.7 million deal to acquire the Lowood country estate in 2018 did so without being told how the subsequent £203 million needed for a Tweedbank village extension would be paid for.

But councillors did have before them a detailed confidential report from consultants which listed weaknesses, risks and threats as well as advantages and opportunities associated with the impending transaction with Lowood's owners.

Now, a copy of that document has been released by the local authority four years after the estate's purchase, and in response to questions posed by Not Just Sheep & Rugby. 

The report from specialists Ryden and Turner & Townsend was deemed commercially sensitive by the council when it was produced in May 2018. All local authority discussions linked to the Lowood deal were conducted in private.

There were a number of warnings outlined by the consultants including this one on viability for housebuilders: "There is likely to still be a considerable amount of work to be done to convince a volume builder that this postcode area is one where they should commit their attention at the present time. We recognise, however, that the Council are taking a much longer term view."

And commenting on the regional residential development market the appraisal team noted "The appetite from house builders within the Scottish Borders has been relatively muted in recent years with little interest from the large volume builders."

So far as the industrial development market was concerned, the report pointed out: "There has been very little speculative or new industrial development within the Scottish Borders in recent years. A majority of activity is associated with buildings constructed from the 1970s onwards with average transactions relating to accommodation below 500 square metres. Scottish Borders Council themselves are a significant landlord and the Central Borders has been where a majority of activity has been associated. Much of the activity relates to relatively short term lease arrangements of small units."

On the flip side, under a section headed Opportunities the appraisal says: " The larger Tweedbank expansion offers an opportunity to deliver a new settlement and unlock employment land opportunities over the medium to longer term. This would be aligned to infrastructure investment with the opening of the Borders Railway.

"Improved infrastructure associated with the Borders Railway may lead to increased developer confidence which may magnify as the destination becomes more established / mature and further complementary infrastructure is provided, thus seeking to attract a greater proportion of the target market to relocate into an area."

In drawing attention to a number of weaknesses linked to the proposed purchase and development of Lowood, the consultants wrote "At the present time, mainstream house builders remain selective in terms of postcodes and settlements and have continued to focus on existing legacy and land banked land parcels with acquisitions tending to be in established locations. 

"There is a recognition at this point in time that the private sector is unlikely to commit speculatively in major volumes within the Scottish Borders. A majority of established house builders continue to focus upon their existing land banked and legacy sites. There has not been particular evidence of these organisations venturing into the Scottish Borders as yet."

The newly released paperwork confirms that infrastructure costs to develop Lowood were estimated at £13.7 million (2017 prices), and at that stage it was unclear whether the council would have to meet the full amount or if the burden would be shared with developers. Councillors were told: "Some or all of this infrastructure cost may be met by Scottish Borders Council in order to return development opportunities that are more attractive to the market."

And the report makes clear the land for housing included in the estate purchase would be developed over 20 or 30 years.

As the appraisal explained: "If the Council were to acquire the asset then this would represent a substantial commitment financially but would bring control in terms of density, mix, timing and phasing of future land releases. It must be recognised, however, that significant further investment will be required in terms of infrastructure, enabling works, etc with future capital receipts received on a phased basis over the longer term by bringing individual tranches of land to the developer market."

The total sum needed for the entire Tweedbank extension if a particular option was to be adopted is quoted as £219.156 million.

A council spokesperson told us: "The public report to Council on 20 December 2018 mentions that a financial model has been prepared and that for the overall Tweedbank Masterplan, this project would cost £203 million and would potentially generate £1.3 Billion of GVA [Gross Value Added] giving a £8:£1 benefit-to-cost ratio. No mention was made within this report of how this £203 million cost would be funded. The financial model was not published at this stage as an appendix to that report."

We were also told that in the public report to Council on 31 January 2019 the financial model for the City Region Deal was referred to within the body of the report and included as an appendix to the report. However, the financial model was restricted to the £29 million city region deal funding of projects in and around the Central Borders innovation park and did not repeat any reporting of the wider Masterplan programme.

The council statement added: "Officers are currently developing a report which will be considered by Council before 31 March 2023. This is likely to include revisions to the final business case in relation to Lowood to reflect current market conditions and inflationary impacts."

 

Council may seek extra funds for Lowood Estate development

SPECIAL FEATURE on a flagship Borders project lagging behind schedule

Four years after purchasing the remains of a country estate near Melrose for £9.7 million to accommodate housing and commercial development Scottish Borders Council has yet to order the bulldozers onto land at Lowood to start the costly process of installing infrastructure.

The first phase of a plan to build at least 300 houses as an extension to Tweedbank village has already slipped behind schedule from a timetable drawn up in 2019. A land audit predicted 30 homes would be completed in 2023, but that target will not now be met.

And it has emerged that a new business case may have to be assembled as part of an application to outside agencies for substantial sums needed for the construction of roads, utilities and bridges, and to pay for extensive earthworks and other basic essentials.

Not Just Sheep & Rugby submitted a list of questions to the local authority after noticing references to Lowood in SBC's recently published SHIP (Strategic Housing Investment Plan) which was considered by the influential Executive Committee in early October. 

According to page 46 of the SHIP: "“In December 2018, the Council purchased the Lowood Estate, Tweedbank. This the only Scottish Borders strategic housing site identified in the Borders Railway Corridor and in the Edinburgh and South-East Scotland City Region Deal.

"Following a public consultation exercise, revised and finalised Tweedbank Expansion Supplementary Planning Guidance and a Design Guide were agreed by Council in June 2021. These documents will frame future work to develop and agree a master plan for the development of the area, marketing strategy and inform the development of a funding and infrastructure investment phasing package to implement this.

"As the situation clarifies, the Council may need to develop a Business Case in order to seek to secure additional infrastructure funding via City Region Deal and Scottish Government processes, such as Housing Infrastructure Funding grant.”

Opponents of the estate purchase criticised the council for failing to publish a fully costed Business Case with infrastructure prices ahead of the deal.

However, our investigation has revealed that a 74-page document containing this vital information was considered by councillors in private during 2018 prior to the sale going through. A copy of that appraisal by consultants - deemed commercially sensitive at the time - has now been released to us.

The report from Ryden, and Turner & Townsend shows the Lowood infrastructure costs (at 2017 prices) totalled £13.7 million, including £1.5 million for a possible new road crossing over the Border Railway. At that time it was not clear whether SBC would have to shoulder the entire infrastructure bill or if the cost would be shared by developers. The price is likely to have risen considerably in the intervening four years.

As we reported previously, an agent for the council lodged a planning application with SBC's own planning authority seeking permission for the construction of infrastructure at Lowood to include earthworks, landscaping and roadworks.

But the planning process appears to have been in limbo for several months. Since June no new documents pertaining to Lowood have been posted on the authority's planning portal apart from a request for an update on the application from a senior planning officer.

When we asked the council about the lack of progress with their own application we were told: "The planning application for the initial infrastructure remains active and further progress is expected on this soon, linked with the delivery of a care village in Tweedbank."

The SHIP report notes: "The Council is developing a Final Business Case for a Care Village, and has lodged a Planning Application for the construction of a new access road, which could potentially be complete by February 2023." That also seems highly unlikely.

The 2019 Lowood housing timetable suggested 30 houses would be provided in 2023, a further 50 in 2024, 50 in 2025, 50 in 2026 and 120 "post seven years".

But the new SHIP has the first phase of 30 houses to be developed by Eildon Housing Association [EHA] now scheduled for 2025/26. A second phase by Eildon involving 25 new homes has become a so-called Potential Pipeline Development Project.

The plan explains: "Notwithstanding the ambition and drive to deliver as many new homes as possible it is inevitable that challenges and issues means that sometimes projects stall, or have to be removed from the programme."

When asked about apparent slippage to the EHA phasing at Lowood, the council told us: "The reason for the delay is that we need to construct the infrastructure to unlock access to sites for development. Regarding EHA’s ‘downgrading’, this is because a specific site has not been identified for this housing. This will be formalised as we progress discussions with developers."

SBC has also responded to the apparent implication in its SHIP that the local authority cannot afford the infrastructure costs associated with the Tweedbank expansion which will need total expenditure of over £200 million if the original Masterplan is to be implemented in its entirety.

The detailed statement from the council stated: "Officers are currently developing a report which will be considered by Council before 31 March 2023. This is likely to include revisions to the final business case in relation to Lowood to reflect current market conditions and inflationary impacts.

"It was expected at the time of the purchase (of the estate) that further public sector investment would be needed to enable the housing and business space development ambitions set out in the Tweedbank Masterplan, linked to the City Region Deal and other public funding sources."

We also asked for details of the costs incurred since 2018 on servicing the Lowood purchase, and the amount spent on the upkeep of the estate which includes a substantial country house.

According to SBC: "In line with the Council’s Treasury Management Strategy, the Council does not borrow to fund specific projects but only borrows to support the Council’s general cash flow position when required. 

"Prudent cash flow management allowed the purchase of Lowood to be funded from internal cash surpluses with no borrowing required at the time of purchase. There are no capital repayment costs associated with the purchase of the estate due to the intention to recover the cost of the purchase from future sale proceeds. 

"Costs relating to the site are minimal and are centred around property and utility costs which in 2020/21 amounted to £5,096. These costs are fully met and exceeded by rental property income and grazing income from the site."

When the ownership of Lowood transferred to the council it was announced that SBC would enlist a development partner to take forward the ambitious proposals. But so far a partner has not been identified.

In response to a question about any potential partnership being forged, the authority told us: "Soft market testing has been undertaken over the Summer 2022 and it is likely that a recommendation to progress procurement action will form part of the report due to come to Council."

Knitwear industry skills void following short-lived training venture

by EWAN LAMB

The Californian-based academic who recently assessed the prospects for the Scottish Borders woollen industry claims increased public support for 'skills formation' within the trade is imperative following the premature closure of Hawick's Centre of Excellence in Textiles.

When plans for the short-lived project were announced in 2018 - backed by a £610,000 financial package from the Scottish Government - its promoters, South of Scotland Enterprise [SOSE], Scottish Borders Council and a number of national agencies said it would "provide industry-specific training for both the current and future workforce."

According to Councillor Mark Rowley, then SBC's executive member for business and economic development: “This initiative will address business critical issues in the local textiles and knitwear sector and provide a stream of skilled young workers across all roles, enabling the world renowned Borders businesses in this sector to address succession planning issues and reduce or remove the need to send work overseas."

But following its 2019 opening the Centre of Excellence's activities were hit by the impact of the COVID pandemic, and it was forced to close in 2020. Additional proposals for a textile innovation centre and showcase and marketing facilities for the local industry in addition to the training centre were never implemented.

SOSE's Board minutes for February 2021 recorded: ".Challenges around the Textiles Centre of Excellence were raised, and the lack of clarity on its funding. SOSE was still engaging in the project and were discussing the way forward."

In his comprehensive research paper which was reported on in these columns last week Professor Allen Scott wrote: "A very recent initiative in the guise of the South of Scotland Enterprise organization – established in 2020 with significant support from the Scottish government – may well play a positive role in the region’s future economic development in general though its relevance to the woollen industry in particular is unclear.

"Thus far, the organization’s record of aid on behalf of the industry appears mainly to consist of limited financial support to a few firms for machinery upgrading, and its ill-fated experience with the Centre of Excellence in Textiles.”

In response to our questions regarding the 'ill-fated' Centre of Excellence, a detailed joint statement was provided on behalf of SOSE and SBC.

We were told: “The Centre of Excellence in Textiles was a pilot project launched in Hawick in March 2019, funded by the Scottish Government and led by Scottish Borders Council, with support from a range of partners. The Centre aimed to provide critical business skills for the textile and knitwear industry in the Scottish Borders.

 “There was positive work carried out by the Centre in its one year of operation before the COVID-19 lockdown saw it close in March 2020".

According to the statement a total of 32 individuals took part in 16-week training courses, with six going on to gain employment in the industry.

• Two university students gained employment in the industry after taking part in 16 week training courses associated with the Centre
• A positive relationship was developed with Hawick High School, helping to provide its young people with practical skills, as noted by a 2020 HMIE report
• Three local companies used the Centre to deliver training to their employees.
• The Centre also delivered a sampling and production service for the local and wider Scottish industry. Clients included local and national companies and students.

The spokesman then explained: “However, there were also a series of significant challenges, most notably the COVID-19 lockdown which began in March 2020. Its impact included training for one cohort of students ending midway through.

 “As a result of these challenges, a decision was made by Scottish Borders Council to end the pilot project in September 2021, with the Centre not seen as sustainable in the current climate. As part of a review of the Centre, SOSE appointed a consultant with extensive experience in the textile and knitwear industry to fully analyse the industry in the region, and provide some fresh thinking.

 “Their analysis recommended a series of options to ensure critical business skills are provided for the industry. It emphasised the importance of the chosen option of support being:

• sustainable
• focussed on business needs
• drawing on existing expertise and infrastructure
• straightforward and flexible
• measurable

“One sustainable option highlighted by the consultant was the introduction of a bespoke training programme. The provision, provided locally, would aim to develop and deliver courses which meet the requirements of industry and promotes the career of textiles as an exciting possibility. This proposal is currently being explored with partners and it is hoped an announcement can be made in the coming weeks to confirm a way forward.”

 Finally, the statement pointed out that earlier this year, SBC decided to lease the current Centre of Excellence in Textiles building and equipment to a local knitwear firm. This decision supported a local employer and ensured the building and equipment remained in use. 

"It is worth repeating that the Centre of Excellence in Textiles was a pilot project and as a result it has provided vital knowledge and lessons which will assist the public sector to support the industry going forward."

The case for change in Borders textiles industry

SPECIAL FEATURE

A treatise on the obstacles and opportunities within the Scottish Borders woollen industry may sound like an unlikely subject for an award-winning academic based in faraway Los Angeles.

But for distinguished research Professor Allen J Scott, from the University of California, it was an opportunity too good to miss, allowing him to rediscover his ancestral roots in Hawick while investigating for a well-received paper which could point the way forward for the region's surviving knitwear and textile manufacturers.

As UK-born Professor Scott told us, his grandfather William Scott (1847-1928) was a foreman in a Hawick factory, and also spent time in New Zealand. Mr Scott and his wife, originally from Denholm, are both interred in Hawick's Wellogate Cemetery.

Professor Scott's research findings urge a greater degree of inter-company co-operation within an industry which has, in the past, prided itself on its independent ways. And, he believes, there needs to be a greater role for the Galashiels-based School of Textiles & Design.

Many of the professor's previous research projects centred on industrial clusters in urban centres around the globe. His finished Borders paper entitled:  The changing fortunes and future prospects of a traditional industrial cluster: Woollen textile production in the Scottish Borders deals with a mere 27 businesses employing around a thousand people between them. A far cry from the labour intensive heyday when 12,700 workers had jobs in the local mills.

An abstract from the detailed paper states: "I argue that the Scottish Borders region lacks many of the pooled competitive advantages typically found in successful clusters but that carefully modulated policy could do much to improve local economic performance in the future. A number of specific policy guidelines focussed on inter-industrial relations, labour markets and institutional infrastructures are examined."

Professor Scott's objective was to offer an analysis of the historical development, organisational logic, spatial dynamics and competitive prospects of the woollen textile industry in the Scottish Borders region.

He found an industry which has inherited a long tradition of skilled craftsmanship and consistently high product quality and now almost entirely specialised in high-priced, fashion-orientated knitwear and woven fabrics destined for national and international markets. 

"Today, however, given the effects of global competition and relatively inelastic demand for woollen textile products, the industry has dwindled into a small residual cluster of firms, and its reserves of physical capital and its overall level of employment represent only a fraction of what they were in the more ebullient decades following the Second World War."

According to the professor: "The industry is thus faced at the present time with an array of puzzling predicaments but also with many latent opportunities. On the one hand, very tangible weaknesses are identifiable in the joint regional assets and endowments available to the industry; on the other hand, most individual manufacturers in the region are capable of skilled, superior-quality production, and despite the headwinds that they face are still able to maintain a definite presence on some of the world’s most exacting markets. In consequence of these opposing tendencies, a number of important issues must be addressed in regard to the current state of the industry".

And he argues that most of the surviving firms in the region have emerged in the aftermath of long-term restructuring trends with enhanced functional and managerial competence, though the current state of the region-wide woollen industry is unquestionably not all that it might be. The Scottish Borders woollen complex is plainly deficient in productivity-enhancing structures of local interdependence and collective order.

"A more elaborate groundwork of specialised external services is signally absent. Some firms engage in lateral subcontracting practices when their production levels come close to maximum capacity, but otherwise they are reluctant to tap into one another’s special competences, which means, too, that channels of information exchange are to that degree restrained. 

"An additional symptom of this low level of local functional integration is that spinning mills – once a basic component of the complex – no longer exist in the Scottish Borders, and most of the yarn for knitting and weaving is now imported from Yorkshire."

In Professor Scott's view the industry's deficiencies no doubt stem in part from the long tradition of individualism that prevails in the Borders region, but they also reflect the small overall scale of the industry which is unable to generate significant economies of scale and scope. Employees of knitwear and woven-cloth producers in the Scottish Borders are plainly not motivated to assume the risks that they would face in the sort of entrepreneurial experiments that are endemic in more vibrant industrial clusters, he says.

"Just as producers in the Scottish Borders seem to be averse to many of the inter-firm cooperative and collaborative practices observable in more successful industrial clusters so local labour markets display little of the vitality and resilience typically found in these clusters. Front-line knitting and weaving workers are certainly skilled and motivated, but signs of enervation are evident in the overall labour force which now comprises mainly older individuals, and new blood in the guise of habituated job-seekers is in short supply."

This is Professor Scott's take on the local School of Textiles and Design: "It is undoubtedly a critical adjunct to the local woollen textile industry, and a number of its former students can be found scattered around different mills in the region, but its potential role could almost certainly be much improved, most notably in view of the fact that a high proportion of its graduates leave the south of Scotland altogether for greener pastures elsewhere."

Despite the contraction of the sector in recent decades, Professor Scott strikes an optimistic chord when he states: "In spite of the evident hurdles faced by the woollen industry in the Scottish Borders, it retains a well-earned reputation for the excellence of its products and it continues to sell much of its output on some of the world’s most discriminating markets. 

"There is currently no explicit brand covering the region’s knitwear and woven fabric products as a whole, but the establishment of a common geographical indication (as in the case of Harris Tweed and Thai silks), possibly under the auspices of the World Trade Organization, is a prospective initiative that is obviously in producers’ interests. The surviving firms in the Scottish Borders possess significant competitive advantages in regard to their internal management and iconic product designs. But, as noted, there are readily identifiable voids in the local industrial system, suggesting that overall growth and market performance could be materially improved by appropriate remedial action." 

The paper concedes that the small size and limited number of producers make public intervention difficult "but all the more urgent". 

"Three points in particular must now be made. First, despite the indurated go-it-alone ethos of most producers, the possibility of constructing a more comprehensive system of inter-firm relations needs to be explored with a view, in particular, to the efficiencies that might be generated by more detailed vertical and lateral interlinkage and cooperation. Second, increased public support for skills formation is imperative as well as more effective orientation of the Heriot-Watt School of Textiles and Design to the region’s recruitment, research and entrepreneurial needs. Third, some sort of common information-scanning and intelligence-processing agency would undoubtedly help producers to keep abreast of relevant technical and economic trends and to sharpen their responsiveness to new market opportunities."

In conclusion, Professor Scott explains that the ravages of recent decades have assuredly taken their toll but are now to a degree in abeyance. The immediate future for the industry remains no doubt uncertain, though a case can be made for a scenario of at least short- to medium-term stabilisation.

"Spontaneous renaissance is an unlikely prospective outcome but some substantial resurgence may be envisaged given appropriate joint action directed to the reinforcement of localised competitive advantages and a resolute long-term effort to set the industry on a new evolutionary trajectory. Realisation of this projected state of affairs will manifestly require concerted leadership, planning and political action focussed on the development of a sufficient common pool of regional resources and capabilities. The alternative prospect, in all likelihood, is a future marked either by stasis or continued slow attrition."