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Peter Fleming: Councils must pursue profit with a purpose

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Councils are introducing new commercial strategies and activities to boost income, efficiency and local economic growth.

As funding shrinks, we have seen more focus on income generation and efficiency savings in local government. But as councils innovate in this area, it is critical that they put social value at the heart of their commercial strategies.

Recent changes to statutory investment guidance and minimum revenue provision guidance mean that councils must continue to be clear about the purpose behind their profit.

Birmingham and Plymouth City Councils are among those leading the way regarding the social value in their commercial practice. Each council has its own specific challenges and, equally, its own unique assets and opportunities.

Birmingham’s commercial activities are having a good impact on local jobs, schools, skills and economic growth.

Key to the city council’s success is its ability to identify and commercialise areas of strength, using a robust, supportive governance model. The council has a broad commercial portfolio returning more than £30m and plans to grow significantly over the next four years.

Rather than view commercial projects in isolation, the council’s vision is to take a business-like approach in every service, every day – making every pound count for Birmingham.

For instance, Cityserve is a direct service offered by Birmingham. Uniquely positioned within school catering, it is socially motivated to feed children a healthy, nutritious meal, whilst competing with the private sector on quality and price, and reinvesting profit into public services.

In return, it has been awarded the Association of Public Service Excellence award for best local authority caterer for the last three years.

Another example is Birmingham’s support of Shelforce, the council’s manufacturing business dedicated to assisting disabled people in finding work. There are now around 25 people employed at its windows and doors factory in Erdington, providing products for major contractors.

Shelforce has also developed a training facility and engages with local special schools to offer hands-on development and support opportunities to help build skills and confidence for future employment.

To the south, Plymouth is a growing city, with a strong marine and manufacturing base and the biggest naval base in Western Europe. The council has replaced 123 strategies with just one, with a clear social value focus and only investing in the local area.

The council’s key driver is economic growth and to increase the numbers of businesses locally – but it must be inclusive growth, which benefits all residents.

The council’s growth and municipal enterprise programme aims to achieve £1.8m a year. Two examples of this are its co-operative trading company, CATERed, jointly owned with local schools, and Delt, a shared service company jointly-owned with the local clinical commissioning group, realising savings through scale and resilience.

The council can step in where there is market failure, for example in direct developments where it is prepared to take on greater risk than private developers. Developments include a local business park, a Next fashion, home and garden store, and an existing industrial estate.

The council has released 33 council-owned sites, using its planning system to develop 5,000 homes between 2016 and 2021, with the possibility to increase this further.

The two city councils are sharing their experiences to support sector-led improvement. Plymouth’s chief executive Tracey Lee was one of the speakers that addressed the LGA’s annual conference in July, at a packed workshop on commercialisation.

The LGA has designed a training programme with the Institute of Directors to support senior officers to develop commercial skills that will help them to make confident and robust commercial decisions.

There are two opportunities to access the training – in Oxford, starting in October and Leeds, starting in January. To find out more visit the LGA’s commercial skills for senior officers web page.

Peter Fleming (Con), improvement and innovation board chairman, LGA; and leader, Sevenoaks DC

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