Why hasn't Peterborough's Hilton hotel been built?

The hotel on Fletton Quays is currently about 80% finished

It was meant to be a high-end hotel with a rooftop bar and al fresco terrace overlooking the River Nene. Nearly a decade after Peterborough City Council lent £15m to build the Hilton Garden Inn, it is still not finished. What happened?

The hotel now

The ambition is for the hotel to become a social space and attract people to Peterborough

Work started in 2020, but stalled in 2023, with the council saying the 160-room hotel was about 80% complete.

The skeleton of the building is complete and a handful of rooms were fitted out.

It still requires major work, such as putting in lifts and a kitted-out gym.

Opening dates for the Hilton have been repeatedly pushed back

Cecilie Booth, the council's now former executive director of corporate services, had said "the hotel will be fantastic", but in September it was revealed there was a pigeon infestation and water ingress.

Their investigation estimated it would cost £1.3m to bring it back from disrepair.

Why did the council pay for the hotel?

In 2017, Peterborough City Council lent £15m to the developer Fletton Quays Hotel Limited (FQH), so it could build and own the hotel, which would be operated as a franchise using the Hilton brand.

The council wanted it to form part of a £120m redevelopment of Fletton Quays - a previously derelict area just across the Town Bridge.

Fletton Quays is also home to Peterborough's new passport hub

The idea would be for local people to use the Hilton's restaurant and sky bar, which would have views of the river and cathedral, and attract business to the area.

Fletton Quays is already home to the new Passport Office and city council headquarters.

What went wrong?

The council initially offered the loan on a 24-month basis, under the impression the hotel would be built by about July 2019.

This was later pushed back, with boarding around the hotel currently still saying "coming summer 2022".

Little or no progress has been made on construction since early 2023.

Ms Booth said: "The hotel should have been up and running by 2020. We had Covid, we had Brexit and the construction industry just dried up."

The council put FQH into administration in October 2023 after repeated delays to the project.

It was able to do this due to powers granted to it as part of the original loan agreement.

How did the council afford it?

It may seem surprising that a council now selling off and repurposing public buildings to make cash would invest in a hotel.

But this money did not come from council tax, which is spent on services.

Instead it came from a ringfenced pot of government money known as the Public Works Loan Board - and must be paid back.

Why didn't another developer take it on?

The council says the hotel will be a place for local people to socialise and have meetings

The city council struck a deal with a developer to buy the hotel in December 2024, but the buyer walked away.

The authority said although other bidders were interested, their offers were not good enough.

Ms Booth said the hotel's status as a distressed asset meant that "everybody want[ed] a bargain", but the council needed to ensure it would get its money back.

Is the council's loan written off?

No, but the company that owes the money was put into administration.

So the loan is unlikely to be paid back unless the hotel is built and starts welcoming paying guests.

What happens next?

In its audit plan for the year ending 31 March, accountancy firm 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.

In September, the council announced it was considering plans to sell the asset in order to recoup some of the money.

The council said for it to complete and operate the 160-bed hotel it would require "significant additional borrowing".

Before it was put into administration in 2023 this cost was estimated to be £10m.

The plans are being discussed at the council's cabinet on 2 October.