We are writing to give you an interim update on the fire safety issues impacting the Regional Capitals fund, and why we have decided to extend the current trading cycle.

This update primarily relates to issues impacting Regional Capitals investors and is only relevant to London investors in the context of the trading cycle extension.

As mentioned in our previous investment update, three weeks ago the Government announced £3.5bn of additional funding to help protect flat owners from bearing the costs of remediation work related to fire safety issues.

While this was encouraging news, we continued to seek clarity on whether the state aid cap, a legacy EU rule which limits the benefit corporate entities can receive from the Government to €200,000, would apply.

The recent announcement stated that “all leaseholders'' in buildings over 18m would be covered by additional funding to replace external cladding systems, which implied that the state aid cap would be removed from the Government’s Building Safety Fund.

We sought to clarify this with the Ministry of Housing, Communities and Local Government, and they have told us that a cap will still apply to the Building Safety Fund. We have been told the detail of this new cap will be communicated to us in due course.

A favourable change to the level of the cap would mean that Bricklane would be able to reduce the £1.4m cost provision which has been set aside in the Regional Capitals fund, as each new building became eligible for funding. The detail of this new cap may or may not be communicated alongside further detail of the additional funding, which is expected in the Budget tomorrow.

However, the Government has told us that a decision has not yet been made on how the additional £3.5bn of funding will be delivered. If the Government is to be taken at its word, i.e. that it will fully fund the cost of replacing unsafe cladding for “all leaseholders”, the new funding will be delivered through another uncapped mechanism.

Bricklane’s next trading cycle is scheduled for this week and so, in light of the likely announcement, the trading cycle will be extended for a further two weeks so that investors have sufficient time after the Budget speech to adjust/cancel their trading requests, if they so wish.

In other developments, you may recall that last November, the House of Lords added an amendment to the Fire Safety Bill which would prevent leaseholders (such as the Regional Capitals fund) bearing any of the costs of remediation work related to fire safety issues.

Last Wednesday the amended bill returned to the House of Commons but the amendment failed to pass. With the Government proposing its own, more nuanced solution to the crisis, more than 30 Conservative MPs supported the amendment, which was short of the 44 required to defeat the Government.

This means that the state aid cap remains the primary issue for the Regional Capitals fund, in advance of buildings qualifying or otherwise for Government funding.

We expect to learn more in tomorrow’s Budget, and will continue to keep you updated.