The Potential of Local Authority Trading Companies

In my role as Board Member for the LATCo Network I am often approached by other professionals who want to find out more about the potential of Local Authority Trading Companies. One of the reasons I have helped pioneer the start-up of the LATCo Network is to provide such expertise for our sector as nothing else really exists.

One such approach was from somebody who is a senior manager in the field of adult social care, asking if they should consider setting up a Local Authority Trading Company (LACT). My answer to this question was that yes, they certainly should, given their experience of delivering efficiencies in this service area.

However, despite being a good basis to work from, previous experience is not the only thing that needs to be taken into account. Before deciding to move towards a LATCo, the basics must be right. The cost base must be understood, efficiencies driven out and cultural problems tackled. Only once all these have all been considered is it time to begin thinking of selling services.

Establishing a LATCo will provide a platform for you to offer services to others without the constraints placed on local authorities and their traded income. Your opportunity lies in your core service to your Council; get that right and you have something you can sell to others. Organisations will buy your know how, reliability, financial security and the fact the profits you make go back into public service. Increasingly this is a more desirable model than a purely commercial one.

Setting up a LATCo is not easy, but it is a more than worthwhile exercise. It needs to be the right move, proven by a business case that considers the strategic, financial, economic, commercial and operational perspectives that support the investment and direction. On the assumption it is, you’ll need a wide-ranging project group that includes all stakeholders, so that people buy in from an early stage. This will avoid lots of problems down the line as otherwise there can be differences of opinion which can cause delays and increase cost. You need to be very clear about why a LATCo, what it’s expected to deliver, and what the dependencies are for that.

Some LATCos have failed because expectations of them were unrealistic. My advice is go back to what it is you are trying to deliver, what are the barriers and how can you overcome them before you move to a LATCo. This move in itself will not fix an undeliverable contract or guarantee instant financial return, you must allow time for a business to establish itself.

A typical LATC model involves the TUPE of the workforce. This needs to be handled carefully – TUPE often has a bad name – so early reassurance with trade union colleagues will be necessary. You need to create the burning platform so that they can see the transfer is essential for future growth and prosperity, and what the alternative could be like if things were left as they are or privatised completely. It could be that councillors are twin hatted, adopting a Shareholder Group role in addition to Cabinet roles. This connection is likely to be seen as helpful to the transferring workforce, less of a step into the unknown.

Often a LATCo is seen as a fix to a ‘broken’ culture and there is no doubt it can help as it is a new dawn. It is a chance to lay out the foundations which should be agreed with the staff. You can show how advantage can be taken of the new freedoms LATCo operations present, whilst remaining in kilter with your existing local authority. That wide sense of ‘team’ is important - What are your vision and values and is your programme in tune with these?

So, to summarise, there is lots to think about. There is nothing like a bit of hand holding through this complex process, something which the LATCo Network can help greatly with.

The LATCo Network is the first membership organisation founded by LATCo’s for LATCo’s providing a sector voice & support for our members delivering commercial public services.

Simon Howick, Managing Director, Oxford Direct Services and LATCo founder member will be speaking at the LATCo Summit the inaugural one day conference that brings together forward thinking, commercially minded Local Authorities, LATCo's and other public sector, not for profit and commercial organisations working in and around this sector as enablers.

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