To:
EXECUTIVE
1 JUNE 2021
Support to Enable
the Recovery of Leisure Activities
Executive
Director of Delivery
1 Purpose of
Report
1.1 To outline the support
proposed by Bracknell Forest Council to Everyone Active (EA) to
enable its recovery from the impact of the Covid-19 pandemic and to
ask for Executive approval for that support.
2
Recommendations
That the Executive:
2.1 Agree to consider further
financial support for Everyone Active if required for the period Q2
21/22 dependant on usage and based on actuals through the quarter.
A decision in relation to this would be taken at the end of the
quarter.
2.2 That this principle for
support is applied to the rest of the financial year 21/22
3 Reasons for
Recommendations
3.1 The Executive has
previously agreed three financial support packages for EA in April
and July 2020 and March 2021. As stated in the Q1 Executive paper
any further requests for financial support would be bought to the
Executive for a further decision.
3.2 EA operate Bracknell
Leisure Centre, Coral Reef and Downshire Golf Course on behalf of
Bracknell Forest Council. EA’s income is solely dependent on
customer membership fees, cash sales and ancillary sales
activities, such as catering. This income underpins a
“management fee” arrangement with the Council, through
which Bracknell Forest receives an annual income of £1.3m per
year from EA, a significant sum which helps fund council services.
The remaining income from customers covers EA’s staffing
costs, premises costs and operating profit.
3.3 At the time of writing this
report Downshire Golf Complex, Bracknell Leisure Centre and Coral
Reef are open and trading. DGC reopened on the 29th
March, BLC on the 12th April and Coral Reef on the
19th May in line with Government legislation. As such,
by the time quarter 2 21/22 starts on the 1st July all
sites should be open.
4 Alternative
Options Considered
4.1 The Executive could
determine not to support EA’s cashflow position if it is
required. The consequence of this would be that EA would need
to take a commercial view on whether to re-open the facilities or
not. If they remain closed due to trading uncertainties, the
costs for hibernating buildings will continue and increase over
time, with the council having to meet these costs, with no likely
prospect of recovering them. This option may result in contractual
issues against the Council.
4.2 Should the Council and EA
not be able to reach a position where EA feels able to re-open the
facilities, the contract would need to be terminated and an
alternative operator sought. In the short-term, the only
financially viable option would be for the Council to set up a
Teckal exempt company specifically to run and manage the Leisure
sites until a further procurement exercise could take place. This
would inevitably result in delays in re-opening as it would take
time to establish such a company and undertake the necessary
consultation with staff prior to a TUPE transfer, a process that
cannot happen while staff are furloughed. There would be
significant initial costs associated with such a process and
previous experience showed that the Council is unable to run
leisure facilities as profitably as a specialist operator such as
EA. The loss of customers arising from a delay in re-opening
would further exacerbate this position.
4.3 Alternatively the Council
could stop providing leisure services in the Borough, recognising
these are not statutory services, although they are popular local
facilities with over 1 million visitors in 2019/20.
5 Supporting
Information
5.1 The decision in relation to
the management fee / costs & losses will be taken at the end of
Q2 based on the performance of the centres during the quarter. This
will be based on the successful open book approach as per 20/21 and
Q1 21/22. The total received by the Council in ‘usual’
times would be £330k per quarter.
5.2 The Governments Income
Support scheme is currently due to close at the end of Q1 so will
not cover any Q2 (or Q3 & Q4) management fee losses unless it
is extended.
5.3 The Council applied for
funding in January 2021 from the governments National Leisure
recovery Fund (NLRF) and was successful in securing £235k. 30%
of this total (£70.5k) was available to be used in 20/21 with
the remainder (£164.5k) for 21/22 to enable leisure sites to
reopen following the gradual lifting of restrictions. Whilst this
funding has to be paid through the Council to EA it will reduce the
overall financial burden on the Council.
Risks
5.4 Clearly there are a number
of risks to the Council in relation to this decision. A more
detailed risk matrix and current mitigation actions is shown in
appendix 1 but the major risks are –
·
Failure of EA as a company and loss of potential repayment of
agreed financial support from the Council – current credit
check has returned a green score of 86/100.
·
Contractual dispute if agreement not reached with EA
·
Insourcing risks would include TUPE, cost, time, management
capacity, legal issues, PR,
Other Councils
5.5 The picture across the UK
is very similar to the recommendations in this report. All Councils
that have outsourced contracts are in the process of negotiating
with their leisure providers and many are nearing agreements. The
majority are leaning towards shorter agreements with a view to
reviewing regularly as the situation develops throughout 21/22. One
Council has recently announced it is in-sourcing its Leisure
services although this was previously run by a charity who
has clearly found it very difficult to continue operations during
the pandemic. It is understood that the vast majority of Councils
who have a contract with EA are having positive negotiations and
agreements are expected to be reached.
Outbreak control plans
5.6 There is a risk to
reopening leisure facilities in that they could be identified as a
source of a future localised outbreak of Covid-19. As such Leisure
is highlighted in the BFC Outbreak Management Plan as a specific
risk location and an ‘action card’ will be detailed in
the plan in the event of an outbreak. Should an outbreak be traced
back to any Leisure site then it could be forced to close which
will have an impact on the figures presented in this report.
6
Consultation and Other Considerations
Legal Advice
6.1 The forced closure of
leisure centres nationally and limits on numbers once re-opened are
considered to be “qualifying changes in law” under the
contract between the Council and Everyone Active. Although the
exact amount of financial support that the Council is required to
grant to Everyone Active is difficult to quantify, the contract
clearly states that the Council is contractually required to work
with Everyone Active to mitigate the effects of the
“qualifying change in law”.
On 23 April 2020, by way of a written agreement, the Council agreed
to defer the management fee payable by Everyone Active for the
months of April – June 2020 until such time as is agreed by
both parties, acting reasonably.
On 20 July 2020, through another written agreement, the Council
agreed that from the period of 1 July 2020 – 31 March 2021,
the Council would provide specified financial support through
underwriting losses up to a certain amount and waiving the
management fee due. An amendment was made to the surplus share
schedule, so that the surplus Everyone Active owes to the Council
is increased during any periods where surplus is made until the
Council has been repaid for losses which were underwritten (not
including the waiver of the management fee). The same approach was
applied for the interim agreement in respect of the period from 1
April – 30 June 2021.
The recommendations in this report align with the Council’s
legal position as it is recognised that a commercially acceptable
solution for both parties is required. It is important that going
forwards, the next interim agreement also includes an adjustment to
the surplus share schedule.
Financial Advice
6.2 The Council’s income
budget for the year is £1,272,860 which excludes the impact of
the previous agreement to waive the management fee of £334,000
for Q1. The Government support being provided to the end of
June will provide income of £237,800 which will help mitigate
any loss we incur. Government officials have advised that no
further Government support will be available during the
year.
Other Consultation Responses
6.3 N/A
Equalities Impact Assessment
6.4 N/A
Strategic Risk Management Issues
6.5 Like all local authorities
who are involved in Leisure services, Bracknell Forest faces a
range of financial, operational and reputational risks associated
with the significant impact the Covid-19 pandemic has had on the
leisure sector. The proposals in this paper are aimed at
securing continuity of service provision with the current operator,
which is believed to be in the best long-term interest of residents
who use and may wish in the future to use municipal leisure
facilities to improve their fitness, health and well-being.
There are risks in supporting the operator as proposed, as it
is possible that the financial support will not be recouped or,
indeed, that EA may still be unable to return to a commercially
viable position and may cease trading. However, there is no
other viable option available that could ensure facilities re-open
as soon as Government rules permit, without which the customer base
would most likely seek alternative venues and would be hard to
attract back. This would make a challenging trading
environment even more difficult to recover from should the Council
need to take back responsibility for operating the facilities
either directly or through an arm’s length company.
Either of these approaches is feasible with preparatory time,
although it should be remembered that the facilities previously
operated at a trading loss when under the Council’s direct
control.
Climate Change Implications
6.6 The recommendations in
Section two have an impact on climate change. Fully opening the
three leisure sites will increase traffic in the vicinity and
increase utility usage. However, there is a significant gain in
residents and visitors well being in relation to participation is
sport and activities.
Background Papers
Executive reports from 28th April 2020, 14th
July 2020, 16th March 2021
Contact for further information
Damian
James, Assistant Director: Contract Services - 01344 351325
damian.james@bracknell-forest.gov.uk
