Why does the i360 owe the council almost £50 million and what happens now?
We've all seen the Brighton i360—formerly called the British Airways i360, could've been called the Brighton Seagull i360 if they'd accepted our sponsorship but whatever. Some people think it makes the skyline more interesting; some think it's a blight on the seafront views; some people enjoyed the tweets made by the official Twitter account during its construction. But there's one thing we can all agree on: it's really, really expensive.
According to council figures, around 1.9 million people visited the i360 between August 2016 and January 2023. With an average ticket price of £12 (and that's before the gift shop), that's around £22.5 million just on ticket sales. The council says it makes a £29.9m annual contribution to the local economy, employing 150 people and it 'directly and indirectly supports' 450 jobs in the local area.
It is one of the world’s most slender viewing towers, offering views along the coast towards Beachy Head and the Isle of Wight, north to the South Downs National Park and south across the English Channel towards the windfarm, and it produces its own energy to power the moving pod.
And yet, it still owes the council almost £50 million (with interest). How?
The i360 build had several funding streams:
- £36m borrowed by the council from the government’s Public Works Loan Board, a government funding agency who gave loans to major building projects
- £10m invested by the i360 business itself
- £4m from the Local Enterprise Partnership
The i360 was projected to earn three times more than it needed to cover its loan repayments. The intention was that the repayment of the loan to the council would include a margin to be invested back into the seafront.
The council also received just over £960,000 of fees from the i360 for the arrangement of the £36m PWB loan. This money was spent on landscaping work on council-owned property around the i360.
What went wrong?
In the i360's original business case, it over-estimated the number of paying visitors it would achieve each year. That, combined with Covid and now the cost-of-living crisis means there is a shortfall of funds to repay the loan. This has led to repeated requests for reviewed repayments from the i360.
Rescheduling loan repayments isn't an unusual thing for businesses to do, in the short term at least—if it will help the business to sustain profitability in the long term, it can be a pragmatic business approach.
To date, the i360 has repaid £5.8 million. It should have repaid close to £18 million by now based on its original repayment schedule.
In July 2022 councillors were asked to consider new terms for the loan made to the i360. The restructure meant that the council would take nearly all profits that the i360 makes in a cash sweep—every six months the council takes all cash within the business, leaving only an operational cash float.
In June 2022, the i360 made a payment of £700k and was due to make a further payment of £900,000 in December 2022 based on the restructured loan. This payment was missed.
Directors and shareholders are not receiving revenue or payments due to the outstanding amounts owed to the council—which should be £2.2 million a year, the council says.
Labour councillors opposed the i360 being funded by the 'public purse', calling it a 'Green/Tory vanity project' that wasn't able to find private funding, and 'a flawed business model from the outset – as we tried to convince our Green and Conservative colleagues of at the time'.
Residents were also against it, calling it 'the i-sore', and 'a disfiguration of the splendid Georgian environs'. At the time, you didn't have to look far to find petition after petition against it—one had more than 2,500 signatures.
Journalists hated it, calling it 'a piss-poor replacement for Brighton’s West Pier' and 'a monumental eyesore... this thick steel pole, with its doughnut-shaped pod, will dominate everything in sight'.
What happens next?
The council say they are 'focused on getting the money owed as quickly as possible'—likely because if the i360 was unable to make any payments, this would become the council’s liability.
The i360 board held a strategic review earlier this year to develop a new business plan and a recovery strategy. At a special Policy & Resources committee last month, that lasted four hours, the board was quizzed on its financial performance.
It's got plans for a new operating strategy going forward, including 'new immersive events' and 'an enhanced food and drink offer'.
Councillors have decided to give it more time to turn things around—the best option to maximise the council's return and protect the public purse, the council says—however, its priority is still to get as much of the loan repaid as quickly as possible.
The council is going to commission restructuring experts to ensure regular and frequent finance updates and cash flow forecasts from the i360, and is hopeful for repayment progress this year. It's told the i360 to pay the council a minimum of £1 million over the next financial year in order not to 'add to its financial burden'.
As for whether or not it will? We'll have to wait for the next cash sweep to find out.