Exclusive:Senior council officers under investigation over botched Christmas festival that cost Edinburgh £3m in lost income

Edinburgh’s Christmas festival in 2022 collapsed in September, resulting in an emergency contract award to deliver it last year

Council officers are under investigation over their handling of last year’s failed Edinburgh Christmas festival following a complaint from the main contractor’s business partners, it can be revealed.

Law firm Pinsent Masons are almost a year into their investigation, which is examining allegations that councillors were misled by senior council officials around the collapse of the Christmas festival.

The Scotsman can also reveal Edinburgh City Council at first denied a complaint was open against officers.

One official at the centre of this dispute is the council’s executive director of place Paul Lawrence, who oversaw both the collapse of this contract and the crisis of confidence around Underbelly’s stewardship of the event.

Angels Event Experience Ltd, which won the £5.5 million contract to run the festival over three years in early 2022, pulled out of the contract in late September of that year.

The decision came after offering an event with significantly less income to the council – now confirmed to be £180,000 – and fewer attractions, throwing the entire event into disarray.

The tender had initially promised a significant increase in events, including a zip wire on George Street in the Scottish capital. But the council later claimed it quickly became apparent the tender was undeliverable.

The fresh revelation comes as The Scotsman outlines for the first time the state of chaos within the council as the contract slid inexorably towards crisis, after this newspaper was disclosed internal emails which detail the collapse of the contract.

Correspondence demonstrates the event descended quickly into a state of emergency, with competing interpretations not only of the initial procurement, but also of the risk expected to be shouldered by the contractor.

Emails also claim the emergency contract, awarded to a consortium of two Edinburgh events companies, Unique Events and Assembly, was a “done deal” within hours of the withdrawal of Angels Event Experience, despite councillors only ratifying it two weeks later at a finance committee meeting.

The Scotsman has previously reported the entity jointly established by Angels Events Experience to run the Christmas festival, Visionar Ltd, took the company to court over an alleged breach of contract. It is understood the case was not defended by Angels, who entered liquidation due to it being advised it was “not anticipated to win” the case against it.

The Scotsman can reveal council officers were cleared by an investigation, led by Pinsent Masons, of leaking a confidential letter from Visionar Ltd to the chief executive Andrew Kerr, to the press. However, councillors remain under investigation for their part in this leak inquiry. Mr Lawrence is being investigated for the contents of his evidence to councillors at a meeting of the finance and resources committee of the council on October 10.

Doomed from the start?

From the very beginning of the process for the 2022 Christmas festival, eyebrows were being raised about the deliverability of the successful tender from Angels.

Edinburgh council opened the tender process in March 2022, operating what is known as a “concession contract”. This is a system whereby a supplier provides a fixed fee rental income to the council in return for running the contract.

In the case of the Christmas festival, five bids were received of which three passed the quality threshold. These were from Underbelly, Unique Events who won the Hogmanay contract, and Angels.

These bids were scored with a weighting of 30 per cent economic against 70 per cent quality, with private papers stating that Angels’ had scored second on quality, but had the highest overall score.

The scale of the difference in terms of financial offering was significant, with Unique Event’s bid the lowest at £1.3m, Underbelly’s at £1.35m, and Angels at a far higher £5.5m.

This is understood to have rung alarm bells among council officers. However, councillors were told officers had no ability to further investigate why the income promised was so much higher for Angels than other bids.

They blamed Scottish Government procurement rules, stating the type of contract allowed officials to only ask whether the figures in the bid were “correct and deliverable”, which Angels did so. Any questions about how these figures were arrived at were, papers state, not allowed.

Deliverability of the contract was, therefore, likely high on the minds of the council as soon as the contract formally began.

In March 2023, Edinburgh’s councillors were told that a standard Christmas festival in the city would normally take “nine to 12 months planning and preparation”.

In the summer of 2022, however, the council and the joint venture undertaking organisation of the event, Visionar, had just seven weeks to organise the entire event – a timeline that loomed as a recipe for disaster.

Emails show while Edinburgh Council approved the contract in mid-June, it took until July 22 for any formal contact to take place between the council and the events team. This was due to the contract being stuck with procurement until late July, with repeated requests for a meeting from the contractor being rejected by lead events officer at the council, David Waddell.

The event quickly hit the buffers, however.

Councillors have since demanded answers around the appropriateness of the procurement process and whether anything could have been done earlier to prevent what happened in the months after the award.

Planning a mess

Central to the allegations against council officers are allegations they misled elected councillors at a meeting of the finance and resources committee in October, just two weeks after the contract collapsed.

In it, Lawrence stated there were “significant issues associated with the delivery of aspects of that programme, practical issues, time issues, other issues”. He also spoke about the fact that many events promised as part of the initial contract, such as a zip line on George Street, were not deliverable.

This is a version of events sources at Visionar, the company set up by managing director of Angels Event Experience, who ran the Christmas market side of the festival, and Taylor’s of Edinburgh, who ran the funfair attractions, fundamentally disagree with.

More than a month of potential planning time was lost due to the contract being held up within the council’s own legal team. One email suggests both Angels and the council believed planning permission was already in place for the event at the time of tender award. The council did not comment on this when asked.

The first full meeting with all parties did not take place until July 26, the first moment that it became clear aspects of the original Angels bid would not be deliverable, such as a planned 300m long zip wire and the closure of a large part of George Street.

It was at this meeting that council officers requested a revised financial income assessment from Angels, something that was not forthcoming. Councillors were later told in January 2023 that it was only at this meeting that concerns about the programme were raised by Visionar.

Sources state, however, the need for a smaller first year festival was due to a lack of assurances from the council about what could be delivered in the shortened timeframe for the event. Much of the back and forth between the two parties centres around the lack of planning permissions and the resulting impact on the event.

Visionar’s first meeting with the chief planning officer at Edinburgh, David Givan, was not until August 10, with further meetings with other planning officers not taking place until August 23. The council did not comment when asked about the delays to meetings.

At one stage, a deadline of August 26 was set by the council for Visionar to submit planning proposals, something dubbed “impossible” by a source close to the matter. Emails also show planning consultants hired by Visionar to take forward the plans battled bureaucracy and inefficiency at the council in their attempt to get applications submitted.

A delay of almost two weeks, from mid to late September, was the result of Edinburgh Council’s online planning portal being unable to cope with the requirements of the application, and due to a payment issue that required the £8,400 in planning fees to be paid by credit or debit card. When files were eventually sent to the council, they were caught by the authority’s firewall system.

This resulted in an inevitable delay to planning being considered, something officers were becoming more concerned about as dates were missed. Private papers state the first available planning committee date to consider the plans would have been November 26, likely either after the event had begun or just days before it was due to open.

However, in the tender specification, the council stated clearly there could be no building on any of the city centre sites until “all necessary planning and building consents are in place”, adding this could take “up to six months in advance” and be subject to their own consultation processes if necessary.

Being asked to take on the financial risk of delivering the event without planning permission was not something Visionar were willing to do. Sources and emails show concerns being raised about the need for planning approval for sub-contractors and sponsors to be convinced to support the festival.

This was summed up by director of place at Edinburgh Council, Paul Lawrence, in the emergency contract award meeting on October 10.

He told councillors: “You’ve got to decide what you want to do, then you’ve got to apply for the permissions to make that happen. But sometimes the two are interlinked, so if you want to do ‘Event X’ and you have to have a planning application in the system in order to get a determination by a date in order to deliver by a date, there is a pretty strict timetable to work to.

"Those were over a number of weeks. Through that process there were some differences of opinion and some matters of tension between ourselves and the contractors.”

Processes for the Angels event had simultaneously been squashed into a short, undeliverable timeframe, but also expecting the business to consider ploughing ahead without planning permission, sources claim.

Such was the lack of clarity around plans, one request to use Waverley Bridge as a Munich Tent received the response of “it’s not a no, but it’s not a yes”, on September 7 from council officers.

This concern followed previous political controversy around the lack of planning permission at earlier Edinburgh Christmas festivals.

The festival in 2019, the last major Christmas event prior to the Covid-19 pandemic, saw Underbelly receive building warrants for its controversial ‘space deck’ market in Princes Street Gardens just days before the market opened.

Two years later, the final year of Underbelly’s contract, the planning application was submitted on September 21 and was only granted on November 16. Underbelly’s final Christmas festival opened to the public just four days after it was granted planning permission.

Visionar submitted applications in the early afternoon of September 26. Four hours later, Angels’ managing director David Kohlert had unilaterally withdrawn from the contract and wrote to Edinburgh Council requesting the applications be withdrawn.

After the cancellation of the contract by Angels, much of the intellectual property, including the planning applications for the events, were passed to the new contractors, Unique Assembly.

Their planning application, delivered by the same planning consultant who had worked for Visionar and supplied by the company, was submitted on September 29, just three days after the contract had been cancelled.

It was approved on November 9, two weeks before Edinburgh’s Christmas opened to the public. Council officials had previously rejected the possibility of an emergency meeting of the planning committee to approve Visionar’s plans.

Other issues had also arisen

While disputes over planning drove the central dispute between the council and Angels, it was also clear Edinburgh’s Christmas was in serious trouble even without these issues. Emails disclosed to The Scotsman show how the council had ongoing problems with the overall Christmas festival.

At the start of September, emails show a request sent to senior officials and councillors begging for clarity around key performance indicators (KPIs) and a lack of planning permission.

One line of an email states these KPIs would be confirmed “once final programme available”, though the contractors said clarity was required “as we continue to invest funds without knowing how we are being assessed”.

In one email, a council official states KPIs would be developed “together” once he knew “what that final officer is”. Others raised concerns over a “reputational risk to both of us if we don’t deliver what was highlighted in the consultation”.

Concerns were also raised about whether councillors were fully informed of the problems facing the festival. A lack of communication with elected members was later labelled as “showing contempt” to councillors and officials were forced to admit this had been an error.

The council had also lost control of the main website previously used for the Christmas festival. It was linked to a group of scamming websites, with experts stating they were “not sure if this domain is retrievable”. This warning came on September 7, with Edinburgh-based agency The Union hired by Visionar to build a new website.

That was due to launch at the end of October, with a marketing campaign starting in mid-October. Work was also underway to establish a communications group involving external and internal media professionals.

Overall, Visionar had contracted ten separate Edinburgh-based companies to work on the Christmas festival. After the cancellation of the contract, many were hired by Unique, but thousands went unpaid by Angels.

One such business owner, Ian McAteer at The Union, said he was furious at the way the council had handled the entire affair.

“We were left with significant outstanding costs,” he said, adding that writing to both council leader, Cammy Day, and officers was met with a brick wall. “Given that all the businesses and staff involved in these heavy losses are Edinburgh-based, I found the attitude and lack of support from our own council representatives totally despicable.

“Rather than step up and support local businesses, they chose to brush the whole thing under the carpet. Perhaps I had too much faith in the concept of representative democracy.”

The council did not comment when asked to respond to McAteer’s comments, nor the loss of the Edinburgh Christmas website.

The collapse

As council officers lost confidence in the ability of Angels to deliver the contract, they began making plans for how to ensure Edinburgh’s Christmas would still go ahead.

Private papers show Unique Events were approached at least a week before the actual cancellation of the contract to “identify if they would be in a position to deliver Edinburgh’s Christmas at short notice, should Angels be unable to deliver”.

Councillors were told Angels submitted a revised offer of four sites and activities with a rental income of just £180,000, well below the £5.5m initially promised. Officials told councillors this was a “materially different” offer for the council, with Angels told that it was “not acceptable”.

However, it is understood Kohlert was confident he would be allowed to run the Christmas market despite pulling out of the contract. Taylor’s were also told they should be patient and they would be running the funfair attractions.

It is also understood the suggestion to withdraw from the contract was put forward by Edinburgh City Council. This potentially explains the lack of court action that followed from the council for the loss of income, estimated at around £3m.

Following the offer of £180,000, officials rejected the proposal and on September 26, Angels formally requested to terminate the contract. Officials informed Visionar at 9am the next morning, allegedly stating that a deal with Unique Assembly was a “done deal”.

Unique Assembly successfully won the emergency project on the basis of a 50 per cent profit share with the council for anything above the first £200,000, which was to be reinvested into Edinburgh’s Hogmanay.

Kohlert was later brought back into the event as the operator of the Christmas markets in Princes Street Gardens through Angels, to the bemusement of many within the city.

Private papers state this was done “to protect these traders and provide a market”, with Unique Assembly subcontracting the market to Angels. The council also insisted on an “open book accounting” system, which ensured “any income generated by the markets is directly invested in the Edinburgh’s Christmas programme and not retained by Angels”.

Angels were estimated to bring in £400,000 from the Christmas market, which the council said was to be used to “support the delivery of Edinburgh’s Christmas”. Following the collapse of the contract, details of other contractors were also shared with the new operators, many of whom were taken on to deliver the event successfully.

Legal difficulties

It remains unclear exactly what the legal relationship between Visionar Ltd and Angels Event Experience was, but in any case the lack of trust from council officers in those working for Visionar Ltd is clear.

In private papers to councillors, the arrangement is described as one set up to “deliver any elements outwith the core businesses of Angels and Taylor’s, for example: marketing, legal arrangements etc”.

However, the recent court case and subsequent liquidation of Angels suggests councillors did not do their due diligence on the nature of the relationship.

The private report states: “It is understood that there is no legal agreement in place between the companies to work as a joint venture or partnership through Visionar Ltd as Angels could not agree to the terms of the partnership and therefore they withdrew from the arrangement. This means that Visionar Ltd exists as a company in name only.”

Given the subsequent reasons of Angels’s liquidation, namely a “breach of contract” allegation fought in the courts that it was advised it was unlikely to win, the suggestion there was “no legal agreement” appears to be incorrect.

In Angels’ last set of accounts before filing for liquidation, it is stated that it “entered into a joint venture with a partner”, with the company having paid £108,987 to an unnamed entity “over which the company had joint control”.

According to Companies House, Kohlert’s only other directorship in the UK was Visionar, before he resigned his position. Scotland on Sunday has also seen emails from Kohlert to his accountants and bank in early July stating that Visionar had been set up to run Edinburgh’s Christmas

Councillors were also later told in March 2023 that Angels had ceased trading in January, with the company having “been wound up”. However, neither of these statements were true.

Angels did not cease trading until February and only began liquidation proceedings after it was told it would lose the court case brought against it by Visionar in the summer. When asked why councillors were told inaccurate information, the council did not respond to questions.

In liquidation papers, this damages claim is known to be more than £800,000. It is understood the case was not defended by Kohlert and that a decree was issued in Visionar’s favour. The company remains a creditor of Angels.

Edinburgh City Council also confirmed it made no income from the Christmas festival in 2022.

In private papers, it stated there was “little confidence” the £3m in lost income from the debacle could be recovered. Councillors were told the council “reserved the right to pursue potential income recovery” had Angels breached any conditions of their agreement with Unique, and showing all income.

It is not clear why paying its creditors, contracted via Visionar, was not a condition imposed by the council.

Questions for council officers and council leaders

The Scotsman has been investigating the collapse of Edinburgh’s Christmas festival since the latter part of 2022.

The investigation has demonstrated there were significant failings across the board and that councillors were potentially misled about the nature of the arrangements.

It is understood the investigation into council officers is ongoing and may yet exonerate them of any wrong-doing.

The investigation also only began following three separate letters to the chief executive, Andrew Kerr, with one sent more widely to councillors before action was taken to investigate.

In a letter from Kerr in early December, seen by this newspaper, he confirms that an investigation will be carried out and that an external party would be engaged to undertake the investigation due to allegations having been made against senior management at the council.

In January, this paper asked the council whether there were any open complaints against council officers. Scotland on Sunday was told there was nothing ongoing.

Following a Freedom of Information request to the council later in the year, officials instead said they could neither confirm nor deny the existence of any ongoing complaints.

The council further confirmed the existence of the complaint and refused to comment further on whether it was confident its officials would be exonerated.

An examination of whether councillors leaked a confidential email to the press on the topic of the complaint is also ongoing after the investigation initially cleared council officials of doing so.

Council officers apologised to councillors in October for failing to keep elected members appropriately informed and updated. There are also questions as to whether Day, the Scottish Labour leader of the council, shared adequate information with councillors on the matter.

Emails show Day was CC-ed into two significant emails from Visionar outlining many of the major concerns and ongoing issues around the project, both sent towards the end of August.

Correspondence shows Lawrence at this point warned Visionar that councillors could only be updated once a final proposal was brought forward.

One letter of complaint to Kerr includes the allegation the offer of £180,000 was “taken to politicians and refused”. It is not clear whether this included Day.

Day failed to answer several questions about the contract when they were put to the council.

He said: “Following a decision taken by the finance and resources committee last October, we agreed to conduct a review of the contract and procurement process surrounding the delivery of Edinburgh’s Christmas 2022.

“Having conducted a full internal review, officers produced a lessons learned report. This was considered by councillors of the same committee on January 26 and subsequently by the culture and communities committee on March 7.

“Separately, following a complaint, connected to Edinburgh’s Christmas 2022, the law firm Pinsent Masons were commissioned to carry out an independent investigation. This is ongoing and so we can’t comment any further at this stage.”

He did not comment on whether he was kept fully up to date due to the emails he was sent nor why other councillors were not informed.

Kohlert, from Angels Event Experience, did not respond to a request for comment.