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Birmingham council edges closer to £250m NEC Group ‘sale of the century’

Birmingham council edges closer to £250m NEC Group ‘sale of the century’

🕔08.Jan 2014

Birmingham City Council is inching closer towards selling its interest in the NEC Group, with a decision on disposing of the conferencing venues likely to be made before the end of the year.

It’s believed the council could raise as much as £250 million if it presses ahead with offloading all of the NEC’s assets including the International Convention Centre and National Indoor Arena in Birmingham city centre.

The local authority desperately needs ready cash to help meet projected £460 million budget cuts and a £1 billion equal pay compensation bill, and is in any case no longer in a position to fund the substantial amount of capital investment required to modernise the NEC and its sister venues allowing them to compete on the world stage.

The council’s Labour leadership at first resisted sacrificing what are often described as the city’s  ‘crown jewels’ when taking control of the council in 2012. But the financial crisis is so grave that a partial or complete sale of the NEC Group seems inevitable – it is simply a matter of time before a deal is struck.

Selling assets such as the NEC, and perhaps Birmingham Airport, has attracted support from the District Auditor who wants the council to raise money through strategic property disposals.

As well as facing unprecedented budget cuts from the Chancellor’s austerity policy, the council also has to find £1 billion to settle equal pay bill claims brought by women workers who were discriminated against. Communities Secretary Eric Pickles has urged the council to help meet the pay bill by selling some its considerable property portfolio.

The council noted in its annual report last year that it was considering options in relation to its NEC shareholdings in order to “enable the NEC Group to enter the next stage of its strategic development”. Although a substantial amount has been spent recently on modernising facilities, alongside the development of a Resorts World leisure and entertainment complex by Genting,  the National Exhibition Centre requires substantial additional investment if it is to compete with emerging conference centres in the Far East.

Speculation about an announcement grew this week after The Times newspaper reported that the council was close to selling the National Exhibition Centre and LG Arena, the International Conference Centre and the National Indoor Arena. Chamberlain Files understands that while the broad thrust of the story is correct, an announcement is not imminent.

The article was backed up by comments from NEC Group chief executive Paul Thandi, who appeared broadly supportive of privatising the company. A council spokeswoman confirmed that Mr Thandi had been speaking “on the record”.

Mr Thandi told The Times: “In the UK, if you step back, most of the exhibition market is either owned by large plcs or private equity firms. A majority of the growth is in growing markets of the world – in China or India.”

He added that much of the new international business sought by the NEC would involve risk capital.

The National Exhibition Centre, originally a collaboration between the city council and Birmingham Chamber of Commerce, was opened by the Queen in 1976. It has hosted a wide range of events including Crufts dog show and the British Motor Show. The ICC has become a popular venue for the main political conferences.

A 2008 survey by KPMG found that the NEC Group provides in excess of £2 billion a year positive economic benefit for the West Midlands economy and supports almost 29,000 jobs.

If a sale does go ahead, the Chamber of Commerce may regret selling most of its shareholding to the council a few years ago. The Chamber said at the time it couldn’t envisage circumstances under which the council would wish to dispose of the NEC.

Cover Image: moduscreative

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