Local government

Building a successful local authority trading company

The trend in using alternative models to protect and develop services has continued over the last year.

As councils continue to confront financial pressure, many have considered how to reduce costs, generate income and improve efficiency by introducing commercial structures.

The introduction of local authority trading companies (LATC) has been a key part of this innovation. While restricted initially to areas such as entertainment or airports – for example Birmingham’s NEC and Manchester Airport – they have grown into new areas such as highways, housing and education. More recently, LATCs dedicated to the delivery of social care services have emerged.

But the delivery of a successful company is not easy.   'Spreading their wings' provides practical guidance – drawn from interviews with councils and from the successful companies we have worked with – on the steps that need to be followed in:

  • deciding to set up a local authority trading company
  • setting up a local authority trading company
  • building a successful local authority trading company.
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Set up and run correctly, LATCs can offer a number of financial advantages – such as cost reductions and increased efficiency – while also increasing local job opportunities and offering councils access to an extended client base.

Key principles for success 

Graph 1: Local authority companies build their success on a number of principles

We have identified the key principles (graph 1) of which to build a successful LATC. Our extensive experience working with a number of local authorities and healthcare bodies means we will be able to assist with effectively understanding and implementing these seven principles:

  1. The council and the company being clear on what they want to achieve and having a clear vision of the future and how the company will grow
  2. Creating a culture of trust between the council and the company
  3. Making effective engagement with people a reality
  4. Ensuring the company structure, governance and its operations are established appropriately
  5. Obtaining professional advice and support where needed in specialist areas including finance, legal, tax and people 
  6. Creating the right business leadership with the right commercial and market facing skills
  7. Promoting cultural change and creating a commercial mindset in the people transferring to the new company

Seven advantages of setting up a successful LATC 

Graph 2: Advantages of LATCs include the ability to:

LATCs offer a number of opportunities (graph 2) to the parties involved, but making the correct decisions at each stage of the process is critical to the impact and effectiveness of the trading company. The seven advantages are:

  1. Trade in the wider market
  2. Generate economies of scale and greater efficiency
  3. Return revenue to local authority through profitability
  4. Create a more commercial culture
  5. Retain people knowledge inside the company
  6. Retain more control and a greater public sector ethos
  7. Safeguard jobs via diversifying work and contracts

If this is something of interest to you or you would like to discuss further then please get in contact with Mark Stocks.