Helping to Balance the Books

Darren Baker
The requirement for every local authority is to bridge the funding gap and balance their books. Property portfolio reviews are therefore on the increase, the need being not only to save costs, but also to maximize the estate and generate revenue. Therefore, local authorities need to look at various options and take the step to work collaboratively with the industry.

With continued funding issues being highlighted weekly, local authorities are coming under increasing pressure to do more with less. 

The Local Government Association (LGA) states that even with the financial settlement and the 1% council tax rise predicted to raise approximately £227m a year, the cash shortfall for front line services will still be at £5.8bn by 2020. Therefore, local authorities are under the spotlight to bridge the gap themselves through solutions such as service cost savings to continue to fund social care services and potential income generation, be this one off or regular income.

This means re-opening the door to their property portfolio from both an investment and income perspective, which a number of authorities have and are starting to review their options on.

Examples include;

Estate Optimisation through rationalisation and re-organisation. One Public Estate has been and continues to be a great initiative and which seeks to combine service and sector offerings into hubs which then free up buildings and latterly land for re-development. Other authorities have looked to benefit from rationalisation by outright sale of unused property or to completely vacate county, town and district offices and sell-off the land.

Property Investment to develop and investment portfolio income purposes has in the last 2 to 3 years become increasingly popular from a local authority perspective. A number of authorities have purchased some significant properties, including Spelthorne BC who purchased the BP Business Centre Sunbury for around £350m. Other investments by other authorities include, hotels, gyms and commercial office and retail space. What this has given rise to though is increased scrutiny from central government which has resulted in an update to the Prudential Borrowing code, so in the future it may well be more difficult to take this option forward.

Development Companies are seen by local authorities to have the potential to help in other areas besides the generation of revenue. The option of housing development is increasingly attractive given the housing demand across the country. Other authorities are making the decision to utilise their development companies to generate inward investment opportunities for commercial, retail or industrial developments thus providing jobs and well as income. To meet the needs though it takes a brave step for the authority to take forward its plans to set up a development company, it is not any easy process but it can be rewarding if they are willing to take the step.

Public Private Partnerships provides a funding solutions and delivery mechanisms, service provisions and have been utilised to good effect of significant project where “Placemaking” is key.

Given the housing shortage crisis and subsequent infrastructure demands ahead of us there may still be some need for other yet undiscovered options and that will take not only innovative thinking but also the ability to take that leap of faith to work the solution through.

The key message is that there is no one size fits all, and authorities must be willing to adapt to the environment and think long term, not just to the next election cycle, but to 5 to 10 to 15 years ahead.

This is where the consultancy services provided by the property industry can bring to authorities a level of experience and knowledge that can fill in the gaps caused by service cuts and the loss of experienced staff

Faithful+Gould (F+G) can support authorities through the challenges that may potentially stall them and we have the financial, legal and property knowledge to enable and deliver solutions and projects. This will ultimately lead onto delivering some of the savings and ongoing revenue needed to help in balancing their books.

At F+G we believe that in order to get best value for local authorities in supporting them through the delivery of the solutions we need to focus on collaborative working, this doesn’t mean a special purpose vehicle or joint venture, it simply means putting together the right team for job

Collaboration must come from the clients’ side as well, and the authorities will benefit from our knowledge of the public sector, and we able to work with them through our Public Sector Frameworks (Pagabo, CCS, HCA, ESPO) to put together multi-disciplinary teams who have the ability to deliver from strategy to completion.

We know that working collaboratively is the key to success in delivering placemaking across the Midlands and throughout the UK.

Our public sector team (Darren Baker and Alex Wakefield) will be at MIPIM 12-16 March 2018.

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