Commercial approach header

Page updated February 2024

Since 2010, due to government cuts, the council has made savings of around 60p in every £1.

We’re also one of the lowest-funded councils in the country, which means that more than many other councils, we need to look at other, creative ways to offset the very worst of the cuts we’ve had to bear.

We use money we borrow to invest in assets that support economic regeneration and service improvement, alongside providing a commercial return to the council.

Our commercial approach has led us to make investments in multiple assets, which are primarily heavily secured and most of which are ‘bricks and mortar’, like Birchwood Park. These investments are supporting local jobs and promoting the local economy, as well as generating income - more than £23 million a year. Our investments are also helping us on our mission to be a truly green council – through projects like our pioneering solar farm investments.

Balancing the risks

We simply don’t receive enough funding to pay for services that people in our town deserve and need, especially our most vulnerable people, without making these investments.

All of our investments are, however, subject to meticulous due diligence and external expertise and we make each separate investment decision very carefully. They are monitored on an ongoing basis and their performance reported to elected members on a quarterly basis. While we are aware that any investment we make isn’t risk free, we remain confident in our overall approach and always work to mitigate any exposures we have in investments in case things don’t go to plan.

Explaining our level of borrowing

What is the council’s current level of borrowing?

We borrow money to invest in assets – like buildings – which we then collect rent from, generating income for us.

Our investments predominantly support a range of policy objectives, like supporting local jobs and businesses, and promoting the local economy.

Our current level of borrowing, which is made up of commercial assets, investments and debt is around £1.8 billion. All of our investments are made in line with our corporate policies.

  • By commercial assets, we mean, for example, that we have invested in some business parks, supermarkets and other buildings that we generate rental income from
  • By debt, we mean, for example, money we have borrowed to help support regeneration in the town centre that we’re paying off.

We could decide to sell our assets, if we thought it was the right thing to do, but we would lose the benefit of the money generated from the assets. It would, however, mean that our overall borrowing and therefore debt costs would reduce.

Ultimately, it is important to remember that many of our investments directly generate income that we can use to fund vital services. It’s really important that we do everything we can to protect our services, which some of our most vulnerable people rely on.

These include social workers providing life-saving care and interventions, environmental services keeping our streets clean and well-maintained, and support services that keep families together.

What is the value of council assets relevant to level of borrowing?

We know that some people would like to see a full list of all of our investments, what their value is and how much they are generating each year. It’s really difficult to do this – valuations change constantly, and some investments are subject to commercial confidentiality.

What we can say, and what we do know, is that our overall level of borrowing stands at around £1.8bn.

Our portfolio is working well despite the challenging national economic conditions. Alongside supporting our policy objectives, our commercial portfolio is generating money through rental returns, which remain stable and very positive. For example, one of our most significant investments, Birchwood Park, supports 6,000 local jobs, more than 150 businesses and equally generates income through rent collection rates at 99%, which is used to support council services.

Why is Warrington’s debt compared to spending power so large?

The resources available to us to fund our services – is about £197m for 2024/25. Our commercial approach means that our current level of borrowing is higher than most of our peers.

The majority of our £1.8bn level of borrowing is asset-back and secured against bricks and mortar. We have previously been able to take advantage of low interest rates and locked-in to long-term arrangements prudently, with the average length of our loan portfolio around 23 years.

This means that in total, after the prepayment of all debt costs, our portfolio of investments generates income of more than £23m that we can use to invest in our services.

Any decisions about our future level of borrowing will always be in context of what we think will be of most benefit to Warrington and our residents. We also know that we can’t keep borrowing at the same levels as we have done previously.

Are you concerned about the level of debt? Could Warrington end up facing bankruptcy like some other councils?

We understand entirely why people might be concerned about our £1.8bn level of borrowing figure. But our commercial approach is different to the position of a small number of councils who have faced “bankruptcy”, by issuing what is known as a Section 114 notice.

The majority of our debt is asset-backed and secured. Despite challenging economic conditions, our approach continues to work, generating more than £23m a year which we use to invest in our services.

We have also previously been able to take advantage of low interest rates when borrowing. This means a large proportion of our borrowing is locked in at low rates for the long-term.

In short, despite the budget challenge we face in 2024/25, our commercial approach continues to work. We are realistic about the challenges ahead as budget pressures continue across the sector, and continue to make the case for a more fit-for-purpose funding settlement, particularly for low-funded councils like Warrington.

Do you accept that you are taking high levels of risk with public funds?

No investment is ever without risk. But every investment we make is subject to rigorous due diligence. We will very often seek the views and advice of external partners. 

How much does the council make each year from its commercial assets/ approach?

This figure will fluctuate slightly each year due to economic conditions and what assets form part of our portfolio. Our portfolio generates around £22m-£23m each year, after paying off all costs linked to our portfolio, and putting some money in to reserves to protect the Council if any of our investments don’t perform to their expected plan.

The government is taking a look at Warrington’s approach. What’s the latest?

In February 2023, we had discussions with public finance experts CIPFA. These discussions were on behalf of the government about our capital and commercial strategy. We welcomed their expertise and challenge, so that we can continue to improve our processes.

A report provided by CIPFA, which is currently in draft, contains a series of recommendations, which we are happy to accept. We have developed an action plan based on these draft recommendations, as we’re keen to implement any improvements we can make as quickly as possible.

We take the findings of the draft report very seriously. We would welcome the final report being completed and published. We appreciate that given the review started in February 2023, people will want to know the outcome of the review. It’s not our decision to publish the report, it is the government’s decision, but would welcome the report being published as soon as possible.

Why are the council’s 2018/2019 accounts and beyond not formally signed off?

In March 2023, after a significant delay, our 2017/2018 accounts were signed off.

We are now working to sign off our 2018/2019 accounts but are affected by national audit issues.

There is a significant national backlog of councils that need auditing. As at December 2023, across the whole of English councils, only four 2022/23 statements have been inspected. Again, in December 2023, it was calculated that there are 918 years’ worth of accounts remaining unsigned across local government. 

Why can't we just spend money we've invested in commercial assets on day-to-day services instead?

A common, and completely understandable, point that people raise, is that if we can spend and invest in buildings and projects, why can’t we just spend that money directly on day to day services instead?

The answer is down to two types of funding – capital and revenue.

Capital funding

Capital funding is money that we can borrow at a low interest rate to invest in projects, schemes and buildings.

The rules around using capital funding are very strict – we legally cannot borrow capital funding to spend directly on funding day-to-day services. We can, however, use capital to make investments which produce an income. The money left over, after the running costs have been taken out, can be then be added to revenue funding for our services.

This means that when you hear about the council giving loans to other organisations, or investing in projects, this is through a different pot of money we can’t access to directly fund services, but we can use the proceeds of income from these investments to fund our services.

Revenue funding

Simply put, revenue funding is money that we use for day-to-day services and which has been subject to extreme cuts due to austerity, with 60p in the £1 of funding being lost since 2010.

What is the latest on the council’s stake in Redwood Bank?

The bank continues to operate soundly despite the challenging national economic conditions.

We invested in Redwood Bank for clear policy reasons to support lending to businesses, something that the bank continues to do, and do well. It is doing what it set out to achieve – lend to businesses, stimulate economic growth and support jobs.

What’s the latest with Together Energy?

We await the final outcome of the administration process to be completed.