Liverpool Council is to write off more than £1m in debts owed by the company that ran a pop music museum in its own building.
Around £1.2m owed to the local authority by Music Experience Britain (MEB) is to be written off by the local authority’s cabinet when it meets later this week after being deemed irrecoverable. A further £300,000 will also no longer be chased up from British Music Experience (BME) in service charges.
A report to the cabinet said: “This is because MEB was dissolved in 2021 and, until recently, BME have been loss-making. Officers have undertaken due diligence and are satisfied that based on BME being a thinly capitalised charity and their operations being loss making until recently, that they are unable to service their historical service charge liabilities.
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“BME have provided their latest accounts to substantiate this.” The council entered into a lease agreement with the charity BME involving £2.6m of local authority investment to bring a new independent museum to the city.
The report said “multiple factors” led to performance not being as expected and as a result, non-payment of fixed rental and service charges of £1.6m. “Various attempts to resolve the situation over the past few years have been unsuccessful,” the report added.
Liverpool Council and BME signed a seven-year agreement with jointly procured company MEB, to operate the museum attraction at the Cunard Building and was liable to pay the council a fixed authority sum of £250,000 a year under a Tripartite Agreement. The council supported the project based on a number of factors but visitor numbers and revenues were “below target projections.”
After MEB made a failed request in September 2017 for the council to invest another £2m into the attraction, it entered into voluntary liquidation in November 2017 leaving staff and six months’ worth of supplier invoices unpaid, including sums due to the local authority and BME. MEB never paid any of the fixed authority sums due to the council and administrators dissolved the company in 2021.
The report said BME was invoiced by the council last year for the fixed authority sum owed by MEB. It added: “BME, based on disagreeing with this and their inability to afford to pay, have withheld paying the service charges contractually owed to the council under the lease until this was resolved.
“Several attempts were made previously by the council to resolve the situation, including the former Director of Finance and Resources granting BME a six-month fixed authority sum and service charge free period in 2019 and providing assistance with marketing. This was authorised directly by the former Director of Finance & Resources by email at the time.
“However, the attraction still struggled to achieve visitor numbers and revenues that would have enabled it to pay a market rent and service charges for the space.” BME’s lease runs until March 29 2024.
The council has explained that it needs to be confident that BME can afford to pay a market rent plus appropriate service charges for the space from March 30, 2024 onwards for it to be able to enter into a new lease agreement on the space with BME. If this is not feasible, then the council will not enter into a new lease with BME and they will have to vacate on March 29, 2024.
The commissioners overseeing the council said in their analysis of the recommendation that the council “recognises there has been weakness in both establishing the lease and managing it lease which has resulted in significant debt to be written off by the City Council. The establishment of a corporate landlord function will lead to more effective and timely management of the property portfolio. its is encouraging that officers have instigated a lessons learned exercise to inform future lease arrangements.”
Cllr Harry Doyle, Liverpool Council cabinet member for culture and visitor economy, said: “This has been a complex process due to historical debt issues mainly accrued by the attraction’s former operator, which went into administration and was dissolved as a company in 2021. It is now run by new and separate entity, the British Music Experience (BME) charity which we have been working closely with to find a resolution.
"Following meetings with Mayor Anderson and the team here, we are pleased to have reached an understanding which will allow BME to pay an agreed service charge to the council and continue to build on the success it is currently experiencing. As a result, 20 jobs have been secured and now that this valued award winning attraction has been supported through the difficult first years, we now hope to see it grow and thrive.”
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