This article first appeared in ALARM, May 2021.
The 2021 Early May bank holiday marked 407 days since the UK Government imposed the first lockdown and, despite a brief respite (of-sorts) over the summer of 2020 and the short Christmas 2020 period, either due to nationwide restrictions or tier systems, leisure centres have been forced to close for over 60% of that time.
Even with doors re-opening on 12 April 2021, life as we knew it has not re-started. Social distancing guidance (with resulting reduced capacities and special rules) look to continue until at least 21 June 2021. Now, leisure centres (whether private or public) face challenges like never before.
The chair of the LGA’s Culture, Tourism and Sport Board estimates it could take at least 18 months before leisure centre membership levels return to 80% of pre-COVID-19 levels.
Private sector providers and leisure trusts
Many leisure centres across the UK are operated by private businesses and leisure providers such as registered charities, community benefit societies or community interest societies. As a result of the pandemic they have faced serious financial difficulties.
The Local Government Association (LGA) issued specific guidance for councils as many leisure providers and trusts couldn’t access grants or government funding during the pandemic. In particular, the LGA identified that trusts could not receive government funding for frontline charities; they are not eligible for Sports England’s emergency response funds; and the Coronavirus Business Interruption Loan Scheme (CBILS) is too risky for trusts to take on. It was reported that most trusts who have applied for the loan have been unsuccessful and only a few across the UK are using this support. This has left leisure providers in a difficult position to withstand the economic impact of the pandemic.
Although re-opening, additional challenges to leisure operators include how to manage the shortfall in revenues, given that current restrictions and social distancing measures do not allow them to operate to full capacity.
In or out?
Some councils have decided to ditch the financial armbands from leisure trusts and bring leisure facilities back in-house.
Councils insourcing leisure centres has been an ongoing trend driven by various considerations, ranging from ideological to purely practical reasons. But the COVID-19 pandemic now represents the most challenging and unique pressure faced by all organisations since early 2020.
‘Outsourcing’ is the term typically used for an organisation entrusting the provision of a particular service to an external third-party provider. Conversely, the term ‘insourcing’ is becoming increasingly used where an organisation terminates or chooses not to renew the contract governing such arrangements to bring the service back under direct control of the organisation.
The timing of any return will be determined by the council's budget and ability to secure additional funding. A council may need to expedite the return if:
- The leisure trust is facing insolvency
- The building or grounds are falling into significant disrepair
- The service is not meeting community needs.
Whether this a short, medium or long-term return will impact on a council’s strategy.
There are essential financial factors to consider. In the pandemic revenue may be lower than when a council last ran a facility. The wage bill may be higher due to COVID-19 secure operating procedures. In the short-term, the facility may be unprofitable and unable to self-fund building and facility adaptations and improvements.
Importantly risk will return to the council. It is vital councils have appropriate insurance and risk assessments are reviewed.
Trust employees will TUPE across (a short-term cost) and these new employees will have access to the council's pension scheme. The composition of the workforce may be different to when the council previously ran the facility and the decision on the status of workers in Uber BV v Aslam and others [19.02.21] should be borne in mind.
For many public sector bodies, insourcing leisure services will allow them to regain control. However, financial pressures may mean not all public leisure facilities will be able to reopen or remain open.
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