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Commercial approach header

Last updated July 2022


We get asked lots of questions about our commercial and investment approach. The following list of FAQs will help to address a lot of the common themes and questions about why we take the approach we do, and why we're pleased with our investments.

Why does the council invest?

Warrington is one of the lowest-funded councils in the country, which means that more than many other councils, we need to look at other ways to offset the cuts to our budget. 

With this in mind, we have been able to borrow money at a low rate of interest to invest with over recent years. These investments – primarily in ‘bricks and mortar’ like Birchwood Park – generate income, around £20 million a year, and promote economic regeneration in the borough.

Why do we spend money on commercial projects, and why can’t we directly pay for day-to-day services instead?

An incredibly 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 us 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.

I've read that the council is in debt. What does this mean?

The money we receive from council tax is less than the cost of social care and children’s services. We need to make investments to raise other funds so that we can continue to provide important services, particularly to those who are vulnerable.

By investing in assets, we have acquired debt – in the same way you
would have debt when paying off a mortgage. However, if we wanted to sell all of our assets, valuations show we’d get more money back than our current level of debt, but we would lose the benefit of the money generated from our assets, which helps us to fund services.

So, while our debt position looks like a big figure, it’s important to
understand the overall value of the assets we have invested in is
larger, and brings in vital funding year-on-year.

What is Redwood Bank?

Redwood Bank remains on track with its original business case and is operating successfully. Investment in shares can go up as well as down, and this is something we are observing across the entire banking sector, so is not unique to Warrington.

The core purpose for investing in Redwood Bank was to promote economic regeneration in Warrington. This follows a consultation with our business community in 2013, which found that banks were not lending to small medium sized enterprises in the town and nationally, due to the failure of the banking system in 2008. This meant business growth and economic regeneration were being held back. It was also government policy, at this time, to promote the development of Challenger Banks.

Why we’re pleased with Redwood Bank

The bank is doing what it was set up to do - to promote economic regeneration in Warrington and the wider North West region.

It has generated 90 jobs, lent more than £130 million to Warrington and the north west region, lent more than £400 million nationally (with deposits of over £400 million) and attracted more than 5,000 customers, which is a remarkable position for a bank which has only been trading for little over four years.

The bank is also multi-award winning and is recognised as a high performer in the industry and in its forth year of operation made its first profit.

What the latest valuation of Redwood Bank means

We invested in a 33% stake in Redwood Bank in 2017, as a result of policy decisions both locally and nationally. Critically, our involvement in the bank was primarily to support regeneration in Warrington and the region, and to provide funding to SMEs in need, stimulating business and creating employment opportunities. Our sole objective was never about making an immediate financial return from the bank, though longer-term and in line with our current business plan, we expect the bank to be profitable and offer tangible returns to the council.

For audit purposes, the bank needs a formal valuation, which has recently been impaired (reduced in value) by around £16 million.

Although this appears disappointing, the bank is valued in the context of the pandemic, which has created vast economic challenges that has affected the entire banking sector, which has resulted in the value of all the major worldwide banks falling in value.

We continue to hold a stake in Redwood Bank and are committed to its long-term future. While we have seen a decrease in the book value of the bank, our investment in the bank is still paying off because it continues to add real value to businesses in Warrington and the wider region. The bank is expected to keep growing – profitably – and has the potential to keep growing in value while delivering on the policy objectives that the bank was initially set up to address.

What's happening with Together Energy?

One project you may have recently heard about is Together Energy. The council made an initial £18 million investment for a 50% stake, alongside secured loans to the business.

We’re very disappointed that Together Energy will be ceasing to trade due to the current energy crisis, which has already resulted in the closure of 27 energy companies, but we have measures in place to protect us as much as possible when things don’t go to plan. Read our current statement about Together Energy.