Unite’s £112m white elephant

It would comprise an 185-room hotel, a 77,000 square foot education and conference centre, and a regional office. This was December 2012 and the union leadership was told the development would cost roughly £7 million.

But the deal fell through and the plans moved to a nearby site. The upshot was that the project was expanded – with a revised £57 million estimate – and contracted to the Flanagan Group, a small company from Liverpool. It was ambitious, but union executives were told it would save money “compared to the high costs associated with London”.

It would be inaccurate to say the rest is history, because the repercussions are still being felt today. Three years ago, Tortoise, which now owns The Observer, published a podcast about the hotel complex, as well as the relationship between McCluskey and the Flanagan Group. Tortoise’s investigation, Inside Unite, found that the trade union spent more than £112 million on the project, equivalent to nearly £100 for each of its members.

That figure was confirmed on Tuesday, when Unite released an internal report into the hotel and conference centre, which opened in 2021. The report was authored by Sharon Graham, McCluskey’s successor as general secretary, and is called Project Clean Up. It is the summary of five independent investigations commissioned by the trade union.

The report says that

• the £112 million development has been independently valued at £38 million;
• the Flanagan Group overcharged for its work by at least £30 million; and
• there are “major discrepancies and missing information which make it hard to trace all the money” behind this £30 million difference.

Many extra costs are identified in the report. They include £1.3 million that the Flanagan Group billed to drill holes in the walls – work that was estimated to cost £90,000.

The Flanagan Group used to carry a testimonial on its website from Unite, which praised it as the “go-to firm for the maintenance and modernisation” of the union’s premises. The company had worked on smaller Unite projects in Swansea, Stoke and Bradford, but never on a development of this size before.

In 2022, Tortoise asked Len McCluskey to describe how the Flanagan Group was awarded the contract for the development. He responded at the time that the questions put to him should be directed to Unite and had been publicly answered before.

According to the report, there was no competitive tendering process, even though the Flanagan Group had “a history of poor performance, delays, cost overruns” on previous contracts. The report says that McCluskey signed the contract with the firm against the advice of staff and lawyers.

Lawyers acting on behalf of Len McCluskey told The Observer that he was “deeply disappointed” by the statements and report published by Unite. They said that the allegations published about him were “categorically rejected by him as inaccurate, selective and highly misleading”. They pointed to McCluskey’s responses to the BBC on Tuesday.

McCluskey’s lawyers told the BBC that the former Unite boss

• was unaware of the concerns of staff or union lawyers at the time the construction contract was signed;
• does not recall signing the main hotel contract; and
• was not involved in the decision to select Flanagan Group.

The lawyers said McCluskey categorically rejects any suggestion of improper dealings.

Unite’s report says that McCluskey called the owners of the Flanagan Group his “good friends”. Tortoise reported that McCluskey came to a Liverpool hotel owned by the Flanagan Group in 2014 to unveil a collection of paintings that used to hang in a bar that the Flanagans ran in the city. The Liverpool Echo quoted McCluskey as describing them as a “working-class family who have made good and have never forgotten their roots”.

In 2022, Tortoise put to Len McCluskey an allegation that he was flown on a private jet courtesy of the Flanagans to watch the 2019 Champions League Final in Madrid, and that he was joined by Jeremy Corbyn’s then chief of staff Karie Murphy. Tortoise also put to McCluskey an allegation that he had been repeatedly seen in the Flanagans’ box at Anfield.

McCluskey responded at the time that these two allegations, as well as a third, were “intended to damage my reputation”, “intentionally false” and “malicious”.

According to Unite’s report, McCluskey and Murphy received a private jet flight and tickets arranged by the Flanagan Group to watch Liverpool play in the 2019 Champions League final in Madrid. The report states that the evidence “comes from tickets and flight information sent to Len McCluskey’s Unite email”. It also found that McCluskey received tickets for five Liverpool home games, including four with matchday hospitality.

Len McCluskey’s lawyers told the BBC that the trade union boss occasionally attended football matches with the Flanagans but

• paid for his own travel in full;
• always paid the cost of his football tickets, to his recollection; and
• does not believe he attended all the domestic games claimed by Unite’s report.

When the Birmingham hotel and conference centre was opened in 2021, McCluskey said the project stood “as a tribute to the values of this union”. Even then it was tens of millions of pounds over budget.

The Observer has approached the Flanagan Group for comment. The firm previously told the BBC it was “proud” of its work on the development and that the high building costs were due, in part, to “radical changes to design and working practices”.

The UK’s Serious Fraud Office launched an investigation into the project last year.

For further reporting on this story, listen to Xavier Greenwood’s 2022 audio investigation, Inside Unite