Half the councils with the largest exposure to the stricken Icelandic banks are still relying on the same treasury management advisers they had when the banks collapsed, exclusive LGC research has revealed.
Of the 10 councils most exposed to last October’s financial crisis, five – Barnet LBC and Dorset, Hertfordshire, Norfolk and Northumberland CCs – have decided to stick with their advisers to date. A clutch of contracts are up for tender in the coming months.
Officials at Hertfordshire, which had investments of £28m in Iceland, said “additional information” was now being provided by its adviser, Butlers. But other councils, including Barnet which had a £27.4m stake, said the terms under which advice was being provided had not changed.
However, three - Nottingham City Council, Haringey LBC and Hillingdon LBC - have opted for different advisers. Kent CC has taken on an additional adviser, and Somerset CC began using one.
The news comes just two weeks before the first anniversary of the Icelandic banking crash, which led to councils coming under heavy criticism for having nearly £1bn stashed in the stricken Nordic banks.
The spotlight swiftly fell on the councils’ treasury management advisers amidst allegations their advice had not been tailored enough and focused too heavily on repeating warnings from ratings agencies.
The Local Government Association even said it would support any of its members wishing to take legal action against advisers Butlers and Sector, although no action was ever made public.
Local government finance consultant Howard Knight said he would be suprised if councils did not review the contractual specifications. “I would expect councils to want a more pro-active service than they were previously being offered,” said Mr Knight.
Nottingham City Council, which had £41.4m in Icelandic banks, retendered its contract in February and switched from Butlers to another private-sector adviser, Arlingclose, which advised its clients to quit Iceland as early as 2006.
Nottingham’s deputy leader Graham Chapman (Lab) said the service offered by Butlers had been “quite passive” and the council thought in light of market conditions a more active adviser was required.
“We are taking a very cautious approach but we need to get our investments to earn. We needed to have a more active approach with both our borrowing and our investment and Arlingclose offer that,” Cllr Chapman added.
Director Mark Horsfield said his firm’s council client base had grown by 50% in the last year adding that it would be “fair to say we have seen a reasonable flow of business from those unfortunate enough to be affected by the Iceland collapse”.
A Sector spokeswoman said: “We are confident that we provide our clients with an exceptional treasury management service, born out by the fact that we have secured more than 100 new contracts through tendering since October 2008.”
Butlers declined an invitation to comment.
|Council||Amount in Iceland||Adviser at time of Iceland||Adviser now||Comments|
|Kent CC||£48.9m||Butlers||Arlingclose & Butlers||About to retender contract|
|Nottingham City Council||£41.4m||Butlers||Arlingclose||Changed in Feb 2009|
|Norfolk CC||£32.5m||Butlers||Butlers||No changes made|
|Hertfordshire||£28m||Butlers||Butlers||Contract runs out in Jan 2010|
|Barnet||£27.4m||Butlers||Butlers||Re-tendering in March 2010|
|Hillingdon||£20m||Sector||Arlingclose||Re-tendered contract in February 2009|
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