The costly lessons of the i360 have been spelt out in a new independent report.
Brighton and Hove City Council kept the business case secret from public scrutiny when it decided to lend £36 million to the developer Marks Barfield, citing commercial confidentiality.
But it prevented most councillors and the wider public from being able to see how council tax payers’ money was being placed at risk.
As a result, there was a lack of independent scrutiny as the project developed a momentum fuelled by “optimism bias” and important chances were missed to make better decisions which might have prevented the business from going bust in December 2024, lumbering the council, and by default, council tax payers in Brighton and Hove with a huge debt.
It has since been revitalised by a new owner, Nightcap, which is able to operate the attraction free of the historic debt since March last year.
The report by CIPFA (the Chartered Institute of Public Finance and Accountancy) said: “The business plan used a forecast of between 700,000 and 800,000 visitors annually … In reality the attraction averaged around 270,000 per year.
“Financial projections also proved overly ambitious. The plan anticipated £11.7 million in revenue and £6.7 million in EBITDA (earnings before interest, taxes, depreciation and amortisation) in the first year, rising modestly over the following years.
“The attraction was expected to be highly cash generative, with sufficient income to cover operating costs and service the £36 million loan provided by Brighton and Hove City Council.
“However, the i360 struggled to break even and eventually defaulted on its loans.
“As well as visitor numbers, a further key issue was the overestimation of revenue per visitor and secondary spending, such as purchases at the Sky Bar and merchandise sales.
“The expected conversion rates and spending levels did not materialise, undermining the financial viability of the project.
“The Brighton i360 business plan demonstrated optimism bias, a common cognitive and planning pitfall in large infrastructure and public sector projects.
“Optimism bias refers to the systematic tendency to overestimate benefits and underestimate costs, risks and timelines. It has been particularly prevalent in public infrastructure and regeneration projects.
“While the (business) plan referenced and benchmarked against a number of regional UK attractions, it also considered iconic global landmarks such as the London Eye, Eiffel Tower, CN Tower, Empire State Building, Berlin TV Tower, Willis Tower and the Auckland Sky Tower and used some of the information on these attractions to determine market penetration.
“These international comparators operate at a scale and within destination markets that bear little resemblance to the local regional context.
“The approach should have primarily focused on benchmarking against domestic attractions such as the Spinnaker Tower, in Portsmouth, Blackpool Tower and Sea Life Brighton.
“These UK-based comparators provide far more relevant insights into visitor penetration rates, seasonality patterns and average spend per head in comparable market conditions.
“Strengthening the focus on such regional benchmarks would have grounded the projections in more applicable evidence and enhanced the robustness of the business plan.
“Incorporating further feedback from local stakeholders would have added valuable context and ensured alignment with regional tourism dynamics.
“This multi-faceted validation process would have enhanced the reliability of the forecasts and built broader stakeholder support.
“Economically, the project was designed with regeneration and job creation in mind and it largely delivered on these fronts.
“The i360 contributed to local development and provided employment opportunities, aligning with its original goals and reinforcing its value to the community.
“One of the key elements of the commercial case is the management of risk. The risk register for the project reveals some areas of strength but also some notable gaps and limitations.
“While financial risk was included within a version of the risk register, the mitigation considerations lacked the explicit modelling for the financial risk associated with the potential underperformance of the i360 project.
“Specifically, it did not sufficiently address the scenario in which the attraction fails to generate sufficient revenue, leading to loan defaults and substantial financial losses.
“The register does not account for optimism bias, particularly in the context of visitor number projections and revenue forecasts.
“The absence of such adjustments contributed to inflated expectations that were not adequately stress-tested, increasing the risk of financial shortfall.
“There is no detailed assessment of the risk that Brighton i360 Ltd might fail to meet its debt obligations nor of the council’s exposure as the lender.
“This oversight is significant as the council remained liable for repayments to central government even after the operating company defaulted.
“A thorough evaluation of this risk, including mitigation strategies and contingency plans, should have been included.
“The potential reputational damage to the council from project failure, public criticism or perceived mismanagement is understated in the register.
“Given the high-profile nature of the project and the financial implications, reputational risk should have been more prominently featured and analysed, with clear mitigation strategies to manage public perception and stakeholder trust.
“The register lacks an assessment of governance-related risks, such as issues with board composition, absence of independent financial oversight, and potential conflicts of interest.
“These factors can significantly affect decision-making quality and accountability and their exclusion represents a governance blind spot in the risk management process.
“Finally, the register does not consider external shocks such as economic downturns, pandemics or cost-of-living crises – all of which can (and did) have a profound impact on tourism and discretionary spending.
“The failure to include these macro-level risks limits the register’s ability to anticipate and respond to broader environmental changes that could affect project viability.
“The project’s risk register showed strengths in structure, coverage, and alignment with best practices but key gaps significantly limited its effectiveness.
“Crucial risks such as financial exposure, loan repayment failure, optimism bias, reputational damage, governance issues and external shocks were either understated or omitted.
“Had these areas been properly addressed earlier, it may have been possible to reach a more timely and better-informed decision on the project’s future, potentially reducing financial and reputational impacts on the council.
“The governance structures in place lacked the agility and oversight required for a complex commercial venture.
“While the project was delivered on time and within its construction budget, the post-launch phase lacked sufficient mechanisms for performance monitoring and strategic adjustment.
“Roles and responsibilities were not consistently defined, and escalation routes for emerging risks were unclear.
“Communication between stakeholders, including the council, delivery partners and external advisers, was inconsistent, leading to delays in decision-making and missed opportunities for course correction.
“Effective management of complex commercial ventures requires a robust framework that includes rolling forecasts, key performance indicators (KPIs) and independent oversight.
“The absence of these tools in the i360 project meant that early warning signs were missed and corrective actions were not taken in a timely manner.
“Future projects should embed adaptive management principles, ensuring that governance structures are agile and capable of responding to emerging risks and opportunities.
“Additionally, stakeholder communication was inconsistent which undermined public confidence and limited the council’s ability to build consensus around strategic decisions.
“A more proactive engagement strategy, including regular updates and transparent reporting, would have strengthened trust and facilitated better decision-making.
“The council should also invest in internal capacity-building to ensure that project managers and decision-makers possess the necessary commercial and strategic skills to oversee complex investments.
“In addition, whilst the leadership team of Brighton i360 Ltd has strong credentials in design, construction, and commercial operations, there appears to be gaps in financial acumen.
“There is no mention of a CFO (chief financial officer) or financial controller with deep expertise in financial modelling, investment analysis or debt management as part of the senior team.
“Furthermore, the absence of adaptive management frameworks meant that the project was not responsive to changing market conditions or performance data.
“There appeared to be limited use of rolling forecasts, key performance indicators (KPIs) or structured review mechanisms to monitor progress and adjust strategies.
“This rigidity contributed to the persistence of optimism bias and the failure to address financial underperformance in a timely manner.”
The report included a “Summary of Lessons Learnt”
- Strategic Planning and Alignment
- The project was conceptually aligned with regeneration and tourism goals but lacked clearly defined success criteria and measurable outcomes.
- Strategic ambitions were not translated into robust performance indicators, making it difficult to assess progress or impact over time.
- Economic Forecasting and Market Assumptions
- Visitor number projections and market penetration figures were significantly overestimated, and not focused enough on local regional comparators which may have provided a better comparator.
- The assumptions failed to reflect Brighton’s actual market dynamics, leading to unrealistic expectations and financial shortfalls.
- Optimism bias was evident throughout the business case, with insufficient adjustment for downside risks or external shocks.
- Financial Modelling and Resilience
- Revenue and EBITDA forecasts were overly ambitious and not supported by realistic secondary spending assumptions.
- The financial model lacked sufficient stress testing and scenario planning, which would have revealed vulnerabilities in debt servicing and operational sustainability. Later business plan medium and low ‘constrained’ number assumptions were still highly overstated.
- The absence of post-launch review mechanisms meant that financial underperformance was not addressed in a timely or adaptive manner.
- Commercial Governance and Risk Management
- The risk register was well-structured, but failed to capture key financial, reputational and governance risks. While later additions included financial risk these were not given enough emphasis or mitigation strategies.
- There was no modelling of loan repayment risk or contingency planning for default scenarios, despite the council’s exposure as lender.
- Optimism bias and external shocks were not adequately considered, limiting the robustness of risk mitigation strategies.
- Benchmarking and Validation
- Comparison to global attractions distorted expectations. A greater emphasis on more appropriate comparators like regional UK attractions would have provided more grounded insights.
- The business plan lacked independent market validation and relied heavily on a single forecasting source, reducing confidence in its assumptions.
- Governance and Management Oversight
- Governance structures lacked agility and clarity. Roles and escalation routes were poorly defined, and stakeholder communication was inconsistent.
- There was limited use of rolling forecasts, KPIs, or adaptive management frameworks to monitor and respond to performance issues.
- Internal commercial acumen was insufficient, contributing to weak oversight and a lack of challenge to key assumptions.
- The leadership team for i360 Ltd lacked financial depth.
The report also included “Recommendations for Future Projects”
- Apply Optimism Bias Adjustments
Use standard adjustments to temper projections and ensure financial realism, especially in revenue forecasts.
- Conduct Scenario and Sensitivity Testing
Model best-case, base-case, and worst-case scenarios to understand financial resilience and inform risk mitigation strategies. Whilst a later iteration to the Business Plan included a ‘constrained’ medium and low attendance demand, these were still considerably overstated.
- Benchmark Appropriately
Compare intended outcomes with similar market profiles to ensure projections are grounded in realistic data.
- Commission Independent Market Validation
Use multiple sources to validate demand, pricing, and positioning, and engage local stakeholders for contextual insights.
- Implement Pilot Testing and Pre-Opening Engagement
Use data and social media analytics to gauge market appetite and refine offerings before full launch.
- Stress Test Financial Models
Evaluate cash flow under adverse conditions and include contingency plans for refinancing or restructuring debt.
- Establish Post Review Mechanisms
Use rolling forecasts and performance triggers to monitor progress and enable timely strategic adjustments.
This seems to be a sensible analysis of what went wrong with this project. I can’t help feeling that with big swings like these, a certain amount of optimism and faith is always required. If the bean counters were always in charge, nothing exciting would ever get built! That being said, there were plenty of doubts about this from the beginning.
One recommendation in the report makes a lot of sense to me – to make sure there is in-house expertise in infrastructure development project management. Over and over, we see public projects like these run into trouble because the client (the state) has no way of evaluating what the contractors are telling them, or of holding them to account. Increasing state capacity in this area would be a good investment I think.
Yeah, it was a interesting read. I agree with you that adopting no-risk leads to stagnation. Optimism bias huh…that’s food for thought.
Translated: Non business people guaranteed a loan using somebody else’s money and then tried to hide their mistakes by making things worse and delaying the inevitable thereby causing an even greater loss of other people’s money.
I guess they had to commission a report when so much public money was wasted – but what did this report itself cost?
I read it with interest, but it simply repeats some of what has already been said many times – whilst avoiding the political arguments that led up to the public funding of the I360.
All parties had initially supported the i360 project, on the basis that it was to be privately funded.
When Marks and Co couldn’t raise all the money needed for the build the council agreed to have a stake in the project with a relatively small amount of funding.
It was only when the rest of the private funding was not forthcoming that many councillors realised the projected visitor figures did not stack up.
At that point, the Labour group withdrew support from any further funding, but they were outvoted when the Conservatives joined with the Greens to vote the funding through.
There is a YouTube video of the council meeting where the funding decision vote happened. Councillor Warren Morgan, then leader of the Labour group, explains in great detail why Labour would not support further public funding, warning how the council would be saddled with a huge debt should the project fail. Now, with hindsight, his words were spot on.
What is surprising to me is how irresponsible those voting for the public loan were. From an outsider’s point of view, it’s almost like the Torys and Greens were more interested in outvoting Labour.
But note that the national government – under the Conservatives – had actively encouraged councils to be more entrepreneurial in their local investments, to bring in extra income that might balance against the austerity cuts the Conservatives were already making.
The council through it’s own stupidity but itself alongside the West Pier Trust in regards land use.
The short story being
i360 developers has a compensation claim due to continued reliance on promises from the landowners. This claim c.£8m and huge embarrassment was bad news then rather than a big can kick down the road.
The big can kick being to give the pubic works loan .I the time it all fell apart those responsible could run away and the priority lenders get their money back.
A big part of the basis for the decision to fund came from the backdrop of years of deriliction of the site, with at least one terrible overbearing proposal developed by Labour which thankfully fell apart during the planning stage. There was a feeling that something needed to happen and the i360 was far less intrusive than any proposal so far, and also easily reversible for an alternative future use.
Also – as noted in the report – the regeneration and job creation aspects were strong. The value of the regeneration enabled along the seafront at that point will outweigh the debt repayment of the tower.
A point missed in the report (probably because it was funded by Labour) is the unrelenting hostility shown by Labour toward the development which undoubtably affected their ability to draw in support for restructuring and pushed them into abrupt administration. Also missing is an option appraisal or analysis of the decision by Labour to entirely gift the attraction to its new owners with seemingly no attempt to recoup any of the debt in the process
“Brighton and Hove City Council kept the business case secret from public scrutiny when it decided to lend £36 million to the developer Marks Barfield, citing commercial confidentiality.”
How was it even legal to lend PLWB money to a private company when Public Works Loans Board money is meant for public sector borrowing and use?
“Brighton and Hove City Council kept the business case secret from public scrutiny” sounds like a carbon copy of what is happening right now with the £65millions King Alfred redevelopment project and not mentioning the tower blocks planned, so lessons have not been learned. £65millions DEBT will be a lot more debt than £37millions debt with principle and interest every month. New leisure centres have a habit of losing money and needing to be council-subsidised to enable public affordability too.
Councils can borrow from the PWLB and then lend or invest that money as part of their wider powers.
The report mentions being cautious about ‘future projects’. Clearly this hasn’t been considered for VG3.
And yet the officers and mainly Green administration that put this through will never be held to account or face any sanctions despite the scheme costing the taxpayers tens of millions.
It was the current Labour administration that oversaw the collapse into bankruptcy of the i360. They also gifted the attraction to a new owner with no attempt at recouping any of the debt which had been incurred. The bargain of the century for the new owner. Not so for the city.
Some people made a great deal of money on the back of this debacle.
The dodgy ‘back room deals’ away from public view smacks of criminality.
Of cause a proper police investigation hasn’t happened as its ‘all for one ~ one for all’ with local politics and legal community.
If a local company, not financed by the public purse, had accidentally ‘lost’ +£50,000,000 you’d expect some kind of scrutiny by police looking for fraude!
I think people forget the state of Brighton seafront after years of Labour & Tory councils before the i360. The decrepit West Pier Trust porta-cabin behind rusty Heras fencing. The shore-end remains of West Pier boarded up for safety reasons . a sad old empty concrete paddling-pool. However you could go down on Sundays and sell any tat you wanted to get rid off at the seafront market.
There were decades when the whole sea-front from Madeira Terraces to the Bandstand was left to rot with no maintenance. Don’t know why but now we’re paying for it