Dwindling sales from the Ministry of Defence’s £20bn land portfolio have added to the ministry’s financial woes.

In the 2008/09 financial year the MoD brought in just £110m from property sales — two-thirds lower than the eight-year average. This is also 90% down on the £1.1bn made in 2007/08 — although the sale of Chelsea Barracks in west London for £960m in April 2007 accounted for most of this.

This resulted in the MoD falling well short of its £305m target income from the disposal of surplus property in 2008/09. Disposals are a key revenue stream for reinvestment into defence spending and will come as a nasty shock to an MoD already looking for efficiency savings under the government’s Operational Efficiency and Public Value Programmes.

A spokesperson for the MoD says: “The MoD, like other commercial organisations, has been impacted by the economic downturn. Its disposal programme has been affected by delayed sales and reduced sales income. This is being factored into the current defence planning round and will be reflected in future spending plans.”

It could have a knock-on effect on budgets for procuring helicopters and other badly needed equipment, when an expected Strategic Defence Review is published after the election.

The sales target came in the wake of an ambitious Defence Estates Strategy 2006, published at the height of the property boom. Its aim was to slim the MoD’s UK estate down to fewer, larger and more appropriately located sites. The strategy also led to a £231m rationalisation of the Greater London portfolio under the MoDEL programme in 2006-07.

Since then, Defence Estates disposals have been thin on the ground. The largest last year was RAF West Drayton near Heathrow for £24m to brownfield housebuilder Inland.

Richard Haynes, head of public sector advisory consultancy at King Sturge, suggests there may be no appetite for the sites that remain as they are in difficult locations that would require more infrastructure and more planning.

“There’s less low-hanging fruit than there was,” he says. “Sales like Chelsea Barracks were high value and relatively easy to deal with.”

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