Council’s failed sale of leisure company cost £62K

Richard Evans, local democracy reporter

Denbighshire Council has confirmed it spent £62,000 on expert advice for the now collapsed deal to sell its leisure company.

The council released the figure after trade union Unison criticised the authority for its “botched” plan to sell Denbighshire Leisure Ltd.

The trade union commissioned an independent report carried out by the Association for Public Service Excellence (APSE), citing a “lack of transparency” in the council’s “consultation and competitive tender processes”.

‘Fundamentally flawed’

Unison says the report describes the decision-making process behind the failed £1.5m deal as “fundamentally flawed”.

The council has hit back at the claims, saying they could have answered many questions within the report if they had been involved in the production of the document.

At a behind-closed-doors meeting in March, councillors backed the deal to sell DLL, with the council’s eight leisure centres and other venues, with backing from private equity investor, Merseyside-based River Capital, by 20 votes to 17.

The council claimed the deal would safeguard DLL’s future, but the sale collapsed at the end of April, with the investors unhappy over leaks.

The union later argued public money spent on leisure in Denbighshire should not go to companies looking to extract profit from the local community for a “quick buck”.

‘Credibility’

Unison Cymru/Wales regional organiser Tony Jones said: “This report destroys the credibility of the decision-making process around the sale of Denbighshire’s leisure facilities.

“It will be uncomfortable reading for some.

“But residents will question whether decisions were being made in their best interests and who was going to benefit most from the sale.

“The council spent huge sums of public money refurbishing these leisure facilities but then failed to explore all the options before deciding to privatise them.”

He added: “Now the original sale has collapsed, councillors should ensure they have a controlling interest in leisure facilities.

“Every penny spent on leisure in Denbighshire should be for the benefit of local people, not handed to company shareholders looking to make a quick buck.”

Statement

A statement from Denbighshire County Council said: “The council has been made aware of a document produced by APSE Solutions and commissioned by Unison.

“This document was prepared without the council’s involvement or consent.

“The document is therefore based on the instructions given by Unison and specifically states that it should not be relied upon by any other party.

“The document contains a disclaimer to the effect that it does not constitute legal advice, does not draw conclusions and does not make recommendations.

“The document raises many questions which could have been answered had APSE Solutions or Unison involved the council in the production of the document.

“The council committed to closer working with unions as proposal(s) progressed and arrangements had been put in place prior to the council being informed that it would not proceed.

“To be clear, in considering this proposal, the council sought independent, professional advice from external advisers.

“This advice covered a number of legal and other regulatory issues including:

The council’s power to enter the transaction
The procurement and contract issues to be considered
Employment and human resource matters including pension provision and the Code of Practice on Employment Matters
Taxation
Subsidy control
Property issues

“The council also received independent advice as to the valuation of the company and other alternative options that may be available for the future of the company.

“The council has been asked about the costs of this proposal to date. The council has spent £62K to date on independent advice.”

The statement added: “Although the proposal that generated this advice will not now proceed, much of that advice will be relevant to alternative models for the company and is not therefore an abortive cost.

“It should also be noted that this advice was sought in anticipation of a significant capital receipt of £1.5 million to be received by the council for the sale of the shares and the revised contractual relationship would not only have prevented existing costs from increasing, but would result in the fee paid by the council for the provision of leisure services reducing in each year of its operation over a ten-year period by 10%.

“This 10% reduction in year two would be £152k increasing cumulatively to a reduction of £930k by year 10.”