Freedom Leisure Contract Update - Rising Cost Pressures
That the Committee:
1. Notes the contents of this report and in particular the increased costs faced by Leisure Operators across the UK linked to inflation and energy supply;
2. Approves financial support up to a maximum value of £255,000, to be taken from the Business Rates Risk Reserve, to cover additional energy costs for the period 1st October 2022 – 31st March 2023, to be paid monthly in arrears via a fully open-book process; and
3. Notes that a full options appraisal and recommendations for operations and future funding will be presented to the Committee as part of the budget-setting process.
The Committee considered a report on the contract with Freedom Leisure. The Corporate Director – Operations, Homes and Communities explained that Freedom Leisure had asked the Council to consider providing further financial support to cover the increased cost of running the Council’s three leisure centres due to economic pressures.
In summary, the latest forecasted position (not including additional energy costs) showed that in a best-case scenario the Council would receive a management fee of £536,284, with the worst-case scenario leading to a management fee being received of £264,321.
Meanwhile, Freedom Leisure’s current gas and electricity tariffs were both due to expire shortly, and they had informed the Council that projected tariff increases were likely to give rise to additional costs of £252,036 in the current financial year and potentially an annual increase of around £520,000 from April 2023.
Officers acknowledged that rising inflation and energy costs were significant and had not been built into the bid submission when the contract was let. Without some form of intervention from the Council, the operation of leisure services as currently delivered could therefore be placed at risk.
It was therefore proposed to offer direct financial support up to a maximum value of £255,000, to cover the period 1 October 2022 – 31 March 2023. It was recommended that this is taken from the Council’s Business Rates Risk Reserve. For future years, it was proposed to undertake a detailed review of leisure services provision to determine the options for addressing the long-term impact of increasing energy costs.
Furthermore, in June 2022, Freedom Leisure expressed their intention to submit an in-year proposal in respect of their fees and charges. The impact that this would have on customers was discussed and it was agreed to pursue a fees and charges review in line with the normal budget timetable, with reports coming to Communities Committee, Income Generation Sub-Committee and Council as part of the budget setting for 2023/24, rather than request a specific fee increase outside of the budget cycle.
Rob Tyler, Freedom Leisure Contracts Manager, and Jeremy Rowe, Freedom Leisure Operations Director, were invited to speak and they responded to questions from Members. They explained the measures which Freedom Leisure have taken to address options for energy efficiency measures. Rob Tyler explained that this includes reducing pool temperatures, staff environmental training, a cover on the pool at Perdiswell, upgrading to LED lights, establishing energy action plans and the appointment of a group environmental and sustainability manager. An independent report on solar opportunities has been commissioned. Jeremy Rowe commented on the advice from Freedom Leisure’s energy broker to steer decisions on future energy supply.
In the ensuing discussion, Members acknowledged the information provided by Freedom Leisure, which had been helpful in understanding the current pressures and the energy saving measures they had put in place since 2018. Members discussed the alternative options considered, as set out in the report, but concluded that these should be discounted at the current time due to the significant rise in energy costs and inflation, and that the provision of financial support from the Council’s Business Rates Risk Reserve was the appropriate way forward.
RESOLVED: That the Committee agree to:
1. note the contents of this report and in particular the increased costs faced by Leisure Operators across the UK linked to inflation and energy supply;
2. approve financial support up to a maximum value of £255,000, to be taken from the Business Rates Risk Reserve, to cover additional energy costs for the period 1st October 2022 – 31st March 2023, to be paid monthly in arrears via a fully open-book process; and
3. note that a full options appraisal and recommendations for operations and future funding will be presented to the Committee as part of the budget-setting process.