Skip navigation

Gloucestershire Business News

Marketing Gloucester crisis: We're about to find out what's 'hidden under the rug' at the UK:DRIC

The true extent of the financial problems that are "hiding under the rug" of the UK Digital Retail Innovation Centre are set to be revealed.

Until now it has been impossible to know what skeletons are in the cupboard due to the fact that the limited company was registered without the knowledge of its sole shareholder.

Documents seen by Punchline and statements made in last week's meeting of Gloucester City Council's Overview and Scrutiny Committee can now be pieced together.

And by doing that we can confirm that the UK:DRIC was established without any ratification by the Marketing Gloucester board, or the city council.

That means that the £400,000 of public grant money received by way of the Gloucestershire First Local Enterprise Partnership (GFirst LEP) broke the Members Agreement struck by MGL and the council.

That Members Agreement had been agreed in 2017, partly in response to earlier concerns over the financial management of the council-owned, arms-length, teckal company.

One of its stipulations was that MGL was restricted from entering into contracts or arrangements of over £100,000 in value without the council's prior approval.

At last week's meeting, councillor Paul James, chair of Marketing Gloucester and leader of the city council at the time of the bid application was quizzed over the matter.

He said that the council did know about the UK:DRIC being established, citing minutes he had from a monthly performance meeting, held on September 29, 2017.

"There are a number of referenced to the application awaited for the retail lab to the LEP," he said.

"It was noted that if the funding was successful, MGL would be relocated in the first quarter of 2018/19, that shows that the council was aware as far back as September, 2017."

There were two separate companies registered at Companies House bearing the name UK:DRIC or UK Digital Retail Innovation Centre in late November 2017.

Both had sacked former Marketing Gloucester CEO Jason Smith and the company's bookkeeper Richard Brooks as sole directors. One of the companies has since been struck off the register.

Asked whether he, the MGL Board or the Council was aware that the company was being set up, Cllr James said that he, and the board of MGL, were.

He said: "The board members knew it was the intention for the subsidiary to be set up as I have an e-mail from the CEO to a board member asking for the best way to do that.

"I was not told at the time that it was done that the former CEO and bookkeeper had appointed themselves as directors.

"As a non-executive chairman with limited time. I am not aware of every document. You are reliant on the advice of others, the CEO of the company and officers from the council.

"It is my understanding from what I was told that the company didn't need to seek advice from the council to create a subsidiary.

"It should have sought formal permission to enter into the agreement given the amount of funding required and I accept that this wasn't done in a formal sense, although it was reported in this governance meeting in September 2017."

Cllr James and his successor as chair of Marketing Gloucester, Cllr Jennie Watkins were both asked whether there was "comfort" over the grant money, given the current situation.

They were also asked how the money from GFirstLEP was initially applied for and approved and why there wasn't sign-off from the MGL board or council, given the Members Agreement stipulation.

Cllr James said: "In terms of the application to the LEP, anyone who has been involved with those at any point knows, you do have to provide a lot of information.

"There was a substantial document that formed the application and I would hope that the Local Enterprise Partnership have that.

"My recollection is that it was a decision of the LEP board to make that funding request and the chief executive of the LEP is quoted as saying that they are happy with how the money was spent.

"There is a separate advisory board of the UK:DRIC, where a lot of the detail was gone into, although I didn't sit on it.

"The limited company UK:DRIC was a dormant company, it has no assets or liabilities. It was probably set up with the intention of being an active company. I don't believe it was.

Cllr Watkins immediately replied: "I can confirm that there is an active UK:DRIC subsidiary company that does have assets and liabilities in the bank account and a current status at Companies House."

Punchline has seen a report made to the board of Marketing Gloucester, which is believed to have been carried out by council officers, that outlines fears over what may be "hidden under the rug."

It said: "We have no accounting records, bank accounts etc in relation to the UK:DRIC. As such we have no idea what may be hidden under the rug in relation to this entity.

"Numerous contracts and financial obligations appear to have been created for this company, either in the name of the UK:DRIC or Marketing Gloucester.

"The actual substance and contracts underlying any of these obligations is uncertain at present due to a lack of available records.

"The funding and financing for the ongoing costs of the company are unclear.

"The actual document submitted to the county council/LEP for the funding stream stated that an ongoing contribution to these costs would have come from Marketing Gloucester.

"Where these funds were to be derived from is unclear since they were not in the budget from the council.

"The financial statements submitted to Companies House for the period to November 2018 were dormant. This is slightly odd given the funding agreement was entered into before this date."

At last week's meeting Cllr Watkins confirmed that there was "still a lot more that we need to establish" in regards to the UK:DRIC.

She said: "What I can confirm about UK:DRIC - and I take what Cllr James said about being aware of the project, of it coming and there being a level of discussion about how to move it forward.

"What there was not, was any board decision about a subsidiary company being set up.

"If there was there would be a board minute to explain and one explaining why the CEO and bookkeeper would be directors.

"We don't have records over the setting up of the subsidiary or the rationale for setting up the company.

"Therefore, we don't have any records for the company, if they exist, or for the full contractual liabilities for UK:DRIC.

"The liquidator will need to do further investigations to find out what happened.

"What we do know is that the £400,000 was received into MGL and used for, as it was intended, for a capital project on the first floor of the Eastgate Shopping Centre.

"The £400,000 was spent, but there was an overspend of £76,000. That became a debt to MGL rather than the UK:DRIC as it was MGL that was in receipt of the money."

Asked if she had "comfort" over the use of the money, Cllr Watkins said further investigation was required.

"I understand that the LEP have said the £400,000 was spent properly," Cllr Watkins said.

"As far as I am concerned there are other investigations to be had by the liquidator and other parties as to the breakdown of that £400,000 and whether it was spent appropriately."

Punchline understands that papers have been lodged with Companies House to remove both Mr Smith and Mr Brooks from their roles as directors of UK Digital Retail Innovation Limited.

Once they are removed, the liquidator for Marketing Gloucester will have full access to the company records, if any, as representative of the sole shareholder.

Then, and only then, will the full and final bill and cost to both the Gloucester taxpayers and the businesses left out of pocket by the collapse of Marketing Gloucester be known.

Related Articles

Versarien's revenues halve and losses rise Image

Versarien's revenues halve and losses rise

Forest of Dean-based advanced engineering group Versarien saw its revenues halve last year.

Gloucestershire company launches same-day service Image

Gloucestershire company launches same-day service

Gloucester-based Freemans Event Partners has launched a brand-new around-the-clock foodservice logistics offer.

Gloucester business expands at Elmbridge Court Image

Gloucester business expands at Elmbridge Court

Just three offices are now available for rent at Elmbridge Court, following the latest letting.

Cirencester town centre to deliver improved parking Image

Cirencester town centre to deliver improved parking

Better parking and traffic control improvements for Cirencester residents and businesses.

Copyright 2024 Moose Partnership Ltd. All rights reserved. Reproduction of any content is strictly forbidden without prior permission.