Southwark council appeals for government permission to spend £15m on high-profile regeneration scheme.
The future of the UK's biggest regeneration scheme faces lengthy delays as it emerged that one of the partners in it is short of funds.

Joint developer Southwark council has made a shock bid for the release of funds to enable the £1.5bn redevelopment of Elephant & Castle in south London.

It has asked for £15m over 10 years in order to continue its role on the 68 ha project alongside co-developer the Southwark Land Regeneration, a consortium led by Godfrey Bradman and Frogmore Estates.

The move is set to delay the project by six months, putting back the planning application from September this year to spring 2002.

A DETR spokesperson confirmed this week that Southwark has asked for permission to use capital receipts worth £1.5m a year, initially to pay fees to consultants on the project.

The DETR must decide this week whether Southwark's request meets capital receipts legislation, under which local authorities can sell off assets to fund capital investment.

Under the proposed redevelopment, Southwark will not be selling off assets but exchanging 40.5 ha of land for development with SLR.

A DETR spokesperson said: "Usually, the government considers that capital receipts should not be used to support revenue spending unless it is to cover unaffordable costs or costs that would lead to significant revenue savings in the future." Southwark director of regeneration Fred Manson this week confirmed that negotiations were on hold until it was given the green light by the DETR. He said: "We cannot go full speed ahead on the project until we have got confirmation on funding. We have asked for a decision in the next few days." Manson conceded that the council was not selling off assets but said the council was arguing that the scheme was vital for the well being of the area.

Southwark advertised in the European Union's Official Journal in March for legal, financial and planning consultants to add to its project team.

It plans to appoint consultants in July to advise on its development agreement with SLR.

SLR will not invest any more funds in the project until the council has its operating funding and consultants in place. The consortium is understood to be frustrated with the council's delay in securing the funding and expertise it needs to sign the development deal.

A source close to SLR said: "We would have expected them to have their full team up and running by January, when we were officially appointed. Unfortunately, big public authorities tend to make decisions sequentially." The source added that the capital receipts money was required due to the sheer scale of the scheme.

The move has hampered work by SLR's design team, which includes Foster and Partners, Benoy, KP Architects, HTA Architects and TR Hamzah & Yeang.

SLR director Nicholas Taylor said: "No new design work is being undertaken. We will not continue design work until we consult fully with the Greater London Authority and residents over the masterplan." One design team source said: "The delay was unexpected. We have a big design team itching to get involved in this scheme."

Elephant & Castle – the saga

94% of local residents vote for a “major redevelopment” of Elephant & Castle district
£35m of Single Regeneration Budget money secured for the project. More than 20 bids from developers are received by Southwark council for the scheme.
May 2000
A shortlist of three bidders – Southwark Land Regeneration, London Amsterdam Countryside and St George/Land Securities – is produced
June 2000
SLR picked as preferred bidder with LAC as reserve partner
January 2001
SLR confirmed as developer by the council’s ratification committee
April 2001
Southwark council bids for DETR funds to save the project