City council says construction inflation and Brexit uncertainty have pushed project budget up to £130m

The project budget for OMA’s Manchester arts venue The Factory has risen to £130m, with the city council set to find an additional £19m to get the project off the ground, it has emerged.

Original proposals from Rem Koolhaas’ practice included a 2,300 standing-capacity theatre and a separate 5,000-capacity warehouse space for “immersive” events on part of the former Granada TV studios site.

Although the £110m scheme cleared planning in January last year, a revised design for the venue, named in honour of the city’s legendary Factory Records label – home to Joy Division/New Order, Happy Mondays and others, was subsequently approved with reduced theatre capacity.

Now Manchester council has announced that the cost of the project has risen to £130.62m. Although the bulk of the project will be funded by a combination of central government, National Lottery and Arts Council cash, the city’s contribution to the project’s capital budgt would rise by £18.97m to £40.57m.

The Factory by OMA

The Factory by OMA

A report to tomorrow’s meeting of Manchester city council’s resources and governance scrutiny committee said the project’s original budget had been set in 2015, before any detailed site investigations or design work had taken place. It said that construction inflation had been running at approximately 3% a year since then, while “a degree of uncertainty in the construction market arising out of Brexit” had caused “risks” in particular packages where components were bought from Europe.

While the plan was to buy some works packages promptly to “eliminate further uncertainty”, the report said, speciality stage engineering and theatre packages would be procured later to “avoid sub-contractors adding Brexit-related premiums”.

The report said a review of the project had looked at reducing the size of the building as a way to achieve the previous budget. However it concluded that such a move would have “further delayed the opening date” – originally 2019 and now 2021 – and would have “fundamentally undermined and devalued the integrity and concept” of the scheme.

OMA's Factory proposals

The old shape: OMA’s Factory theatre under the 2016 plans

City council leader Richard Leese defended the decision. He said The Factory would be unique in Europe and deliver a “game-changing impact for Manchester and the north” that would be worth £1.1bn to the local economy in its first decade, and deliver 1,500 new jobs.

“Compromising on The Factory’s quality and ambition would have undermined its uniqueness, its purpose and the benefits it will bring,” he said.

“Culture already plays a crucial role in the economy and wider life of the city and The Factory will be a major new destination which will take this to a whole new level.

“It’s a bold and ambitious undertaking and such projects do not come without complex challenges which we have tackled head on now so we can be confident going forwards.

“But The Factory will also bring unprecedented opportunities. The very fact of its presence at the heart of the new St John’s creative neighbourhood has already helped attract hundreds of new jobs there and is anchoring further investment.”

The council said it would fund the project’s increased capital costs “entirely” through receipts from sales of council-owned land, and that the ”one-off cost will not impact on any other council budgets”.

It added that the revised budget included £5.8m for contingencies.

The city council’s executive will discuss the increased project costs next week, and any recommendation to increase the capital budget would go before a full council meeting at the end of the month.

OMA beat a high-profile shortlist of Zaha Hadid, Diller Scofidio & Renfro, Haworth Tompkins, Bennetts, Grimshaw, local practice Simpson Haugh, Dutch firm Mecanoo and Rafael Vinoly to win the project in 2015.