Auditors raise concerns over unfinished hotel loan

Auditors have raised concerns over a £15m loan taken out eight years ago to build a city centre Hilton hotel that remains unfinished.

Peterborough City Council borrowed the money in 2017 for the construction of the 160-bedroom hotel in Fletton Quays.

In an audit plan, accountancy firm EY said there was a "significant" risk the value of the hotel would be less than the amount of the loan.

A spokesperson for the council said: "A report is due to go to cabinet in the near future setting out options for next steps in relation to the hotel development to protect the public purse and the council's interests."

In 2017 the authority borrowed £15m from the government so it could lend money to a developer to build the hotel.

Including interest, that amount has grown to about £17m.

Construction stalled in 2020, which the authority blamed on a slowdown in the buildings industry following Brexit and the Covid pandemic.

The company responsible for building the Hilton went into administration in 2023, prompting plans by the council to sell it to another developer.

Despite striking a deal last year, the sale unexpectedly fell through before contracts were exchanged.

The council recently decided to buy the hotel in order to write off its loan to the developer and then restart construction work.

The plan is for the council to oversee the completion of the hotel, before it can pay back its loan to the government, either by selling the hotel or using the income generated from guests.

In its audit plan for the year ending 31 March, EY highlighted concerns over "governance arrangements in relation to the Hilton hotel loan".

It said there was a risk the sale of the hotel would not be sufficient to cover the cost of the loan.

"We recommend the council to maintain vigilant oversight of the financial implications arising from the Hilton hotel loan," it said in the report.

The ambition is for the new hotel, which is currently about 80% complete, to form part of a wider redevelopment of the Fletton Quays area.

It would be run as a franchise using the Hilton brand.

A spokesperson for Hilton has previously said: "Hilton Garden Inn Peterborough remains an important project for us and we look forward to working closely with key stakeholders to complete the development at the earliest opportunity."

EY's report will be considered by the council's audit committee at a meeting on 21 July.

A report produced ahead of the meeting said: "Ensuring our base foundations are robust forms a crucial part of the council's journey to financial sustainability."

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