College faces debt in land deal

9th January 2009 at 00:00
Rescue plan for Jewel and Esk as economic downturn takes hold. Neil Munro reports

Discussions were continuing this week on rescuing the financial package put together for the Pounds 55 million project to rebuild the twin campuses of Jewel and Esk College in Edinburgh and Dalkeith.

In the first public sign of the credit crunch hitting large-scale school and college building programmes, the college discovered a Pounds 22m shortfall in the funding package after the collapse of a deal involving the sale of college land for house-building.

But the money has been spent and the college's 9,000 students are occupying their new facilities.

An inquiry is now being held jointly by the Scottish Funding Council and the college to find out what happened and why. It is being personally monitored by John McClelland, the chair of the SFC, who is one of the "big beasts" in Scottish corporate and political life.

The inquiry is focusing particularly on the decision-making and governance arrangements for the rebuilding project.

Part of the deal to fund it involved the sale of 15 acres of the Dalkeith campus to developers Applecross and Blackrock International Ltd, which planned to build 140 homes there.

The TESS understands that Pounds 10m of the Pounds 22m initial shortfall was paid up-front in September 2007, leaving Pounds 12m to be handed over at a later date.

Howard McKenzie, the principal of Jewel and Esk College, told The TESS that the contract with Applecross is binding. But the company, whose bankers are the Royal Bank of Scotland, which has first charge over the land, says it does not have the Pounds 12m and promises to come up with only Pounds 8m - in a year's time.

The college cannot service a debt of Pounds 12m, and there is added urgency now because its borrowing facility with the funding council and the banks runs out at the end of this month.

Spending on the rebuilding of Jewel and Esk College is believed to be Pounds 3m over budget, although this is said to be "normal" on a Pounds 55m project.

A spokesperson for the Scottish Funding Council said: "We have been in close contact with the college throughout its new-build project, and are aware of the issues surrounding the housing deal. Our chair has also had several meetings with the college's chair about its financial arrangements.

"Both the council and the college have jointly asked technical auditors to assess the situation, and they will be providing us with a report shortly on all aspects of the new building project.

"We are constantly evaluating the impact of the economic downturn on all capital projects that we are funding."


The Scottish Funding Council has confirmed that nine other major college and university building projects "could potentially feel the effects of the economic downturn". These are Motherwell, Borders, Anniesland, Forth Valley, Dundee, New Campus Glasgow, Inverness and Aberdeen colleges, and the Ayr campus of the University of the West of Scotland.

Log-in as an existing print or digital subscriber

Forgotten your subscriber ID?


To access this content and the full TES archive, subscribe now.

View subscriber offers


Get TES online and delivered to your door – for less than the price of a coffee

Save 33% off the cover price with this great subscription offer. Every copy delivered to your door by first-class post, plus full access to TES online and the TES app for just £1.90 per week.
Subscribers also enjoy a range of fantastic offers and benefits worth over £270:

  • Discounts off TES Institute courses
  • Access over 200,000 articles in the TES online archive
  • Free Tastecard membership worth £79.99
  • Discounts with Zipcar,, Virgin Wines and other partners
Order your low-cost subscription today