Wrexham Council are looking to get the go-ahead to create their first trading company, which could put them in direct competition with local private business.
The report to be presented to the Council meeting tomorrow evening says: “There are potential opportunities for the Council to generate additional income by trading its services to other public sector bodies and private organisations.
“While the Local Authority Goods and Services Act 1970 provides the Council with the ability to trade with other public bodies, in order to trade with private sector organisations and generate a profit, the Council would need to establish a Local Authority Trading Company (LATC).”
PricewaterhouseCoopers were commissioned by Wrexham Council for a fee of £25,000 to provide professional advice into the legal, financial and taxation implications of the creation of such a Local Authority Trading Company.
Such Trading Companies can cover a wide range of services , detailed below with examples from other Councils, with Wrexham looking to start with its Corporate Cleaning Service within the Assets & Economic Development department. The aim is to increase its “internal” income ‘while also offering services to the other organisations in the public & private sectors’.
The report states “All employees within the corporate cleaning service will transfer to the trading company.”
One criticism of such a model is the impact it has on existing operations in the same market. The report that is referenced (viewable here) acknowledges this, however despite stating there is no exact data draws conclusions that the impact would be ‘relatively low’:
‘There is no known data that values the commercial cleaning market in Wrexham. AMA Research estimate that the value of the Contract Cleaning market was £5.3bn in 2013.12 In the absence of quantitative data, if the local market I assumed to be 0.1% of this figure it would represent a local market value of £5,300,000. So the targeted external revenue of £84k in Year 1 would represent a share of just 1.6%. By Year 4 revenue from external customers is targeted to rise to £164k, a share of 3.09%. This would suggest that the impact on local cleaning companies would be relatively low.’
Such a potential conflict is also identified as a possible political sensitivity, with it reasoned: “As this would be the first time that WCBC has adopted this delivery model, political sensitivity is high. Concerns could include; governance & control, potential financial risk, and the implications of WCBC being perceived to be competing against private sector businesses.”
Examples of other Council’s running trading companies are detailed giving a flavour of the range such so called LTACO’s can operate in and possible future areas that could be explored and expanded into:
- Shropshire County Council’s spinning out of catering, cleaning and facilities management to ‘IP&E’ with finance, personnel and IT services to follow.
- Swindon Council’s imaginatively named Swindon Commercial Services Limited , which employs 800 people turning over £60,000,000. The services offered are listed as Construction Services, Schools Services, Housing Services, Security Services, PVCu Services, Grounds Services, Environmental Services, Asbestos Services, FM Services and Renewable Energies.
- CYT Limited is a trading company owned by the City of York Council. Again the list of services offered is long, including Social Care, teaching, catering, cleaning and caretaking, driving, finance & accounts, IT, library, manual, admin and project management. Finance (Council tax, business rates, income collection, bad debts, strategic financial support, treasury management services) ICT (Server hosting, Hosted email, Hosted telephony, Design and print, Consultancy) Procurement (advice, consultancy and training) plus Vehicle Management & Maintenance.
- Cornwall Council trades via Cormac Solutions Limited and Cormac Contracting Limited covering a range of activities such as Highways & surfacing, Grounds & public spaces, Facilities Management (property maintenance, cleaning, security), Supply chain, Fleet Management, civil engineering services including design & build, turnkey, highways, car parks, buildings, footway & cycleway construction and project management.
- Essex County Council trades via Essex Cares Limited which is a provider of social care services. Like many others it employs 850 former Council employees.
- Hull City Council’s ‘Kingston Works Ltd’ says it is “A one stop shop service encompassing surveying, estimating and specifications, building maintenance and construction services.”
- Wokingham Borough Council has a trading company called Optalis Ltd, which it says the Council’s “Adult Social Care Provided Services transferred to Optalis, a 100% WBC owned Local Authority Trading Company in June 2011. “
Back in 2013 we wrote this report guessing at the possible outcome of a privately heard Council report, with this week’s Full Council report being the outcome.
The PwC report gives insight to the make up and running method of the company, detailed that due to the nature of the trading company ‘the Council exercises the same kind of control over the entity as it does over its own departments’ and ‘there is no private sector ownership of the LATC or any intention that there should be any.