There's little doubt that much of local government is going through a period of unprecedented tumult.
On top of severe service demand and tight finances, the curve ball of local government reorganisation (LGR) has been added.
But, for this very reason, the future is looking rosy for Local Authority Trading Companies (LATCos).
These companies, wholly or partially owned by councils to deliver services at ‘arm's-length', are in a position to both capitalise on and help the sector as it navigates LGR.
Justin Galliford, chief executive of Norse Group, Norfolk CC's LATCo, says they are seeing a lot of extensions to existing contracts and joint ventures.
‘Given where we are with LGR timelines, people realise they're going to need some interim arrangements, so LATCos are filling that gap.'
Duncan Johnson, non-executive chair of Vertas Group, Suffolk CC's LATCo, agrees this is a strong time for them.
‘It's been relatively positive, in the sense that I think we're seen as a good, safe pair of hands, experienced in the sector and as a result – where there are so many other changes happening – we are often seen as more of a stable scenario than an unstable one.'
Galliford says LATCo s are a great way of helping ‘aggregate councils' where unitaries are being formed.
‘If you're thinking: "What are we going to do with these services in the longer term?" It's conceivable that you may not know, because these services are important. But new unitaries are probably going to have to focus on safe and legal new governance structures and adult and children's services.'
Similarly, Galliford believes LATCos can help reorganising councils avoid disaggregation.
‘If you have an area where there was one county and now there is going to be two or more unitaries, if you take adult, special educational needs and disabilities or highways for example, a LATCo can help prevent that fragmenting, because the unitaries can co-own that and it can continue to deliver across.'
There is also an element of trust that LATCos can bestow on councils, given they are council-owned rather than purely private sector.
‘Our values stem from our local authority ownership,' says Galliford. ‘While we look to generate a profit, we accept we have lower margins than the private sector and we look for longer-term true relationships.'
And with councils facing reorganisation often staring into the unknown, LATCos are well positioned to provide experience.
‘We were the incumbent provider of temporary staff in Northamptonshire CC, and we were there beforehand,' explains Johnson.
‘We're still there now, when it's two unitary authorities and a children's trust and all the districts have been swallowed up. So, we've been through that whole scenario of challenging times with the organisational change and have been there to support the authority.
‘That experience is invaluable when it comes to local government reorganisation across the country, where there's so much going on. There is an opportunity for those that have got experience and can say, well, we've done this before.'
Galliford argues the joint venture model is great because it can help partners bring everything into ‘one consolidated operation'.
‘None of these contracts will be aligned,' he predicts. ‘Why would they be?'
For other LATCos, the focus through LGR is likely to be more on winning individual service contracts than looking to set up joint ventures.
Simon Howick, managing director of Oxford Direct Services (ODS), Oxford City Council's LATCo, points to their commercial waste business by way of example.
This, he says, could be expanded geographically to maximise the potential for more pick-ups in a bigger locality.
And, with LGR in Oxfordshire, he is confident ODS's reputation will help it blossom under a new unitary. Eight years through a 20-year contract with Oxford City worth about £80m, Howick believes this will be ‘novated' over to a new authority.
‘You've got a company that has a good reputation, good quality and has generated, in eight years, some £60m worth of value back for the shareholder.
‘Why wouldn't a new authority look at that as a delivery model?'
What are the other main headaches and pitfalls councils can expect to see as reorganisation moves into top gear?
‘One of the things you will need to think about if you're bringing lots of people into an organisation is whether your HR function is strong enough', says Galliford. ‘Do we have the right level of health and safety in place for frontline operations? Do we have the right IT capabilities to support frontline ops? They're typically the things we see people struggle with.'
And Johnson points to the long game.
‘It's not just getting to day one, it's the two or three years afterwards that takes a lot of time, effort and a lot of skill.
‘The reality is that it is initially about being functional and organised, but it's the transformation that happens after the event that I think is as much the challenging period as anything else.'
The MJ is holding a conference on LATCos on 4 March in Birmingham. You can find out more here
