Leisure Centre Deficit to Be Covered Until Next March
Council transferring more money from reserves due rising losses
The pool at Brentford Fountain Leisure Centre
June 16, 2023
A report to be presented to Hounslow Council’s Cabinet on Tuesday (20 April) has revealed that up to £13.2million needs to be found to cover the operating deficit at the borough’s leisure centres.
Losses grew significantly during Covid and have continued due to inflation particularly the rising cost of energy of which the centres are heavy users due to heating of swimming pools as well as falling memberships at the centres.
In February this year, the council allocated £8million from reserves to cover the shortfall but this amount is set to increase. The report, which is being presented by Cllr Shantanu Rajawat, the leader of the council, recommends continued support for the centres up until March next year. Many other councils have opted to close leisure centres since the pandemic and, if approved, the borough’s facilities would stay in operation for at least nine months but after that the situation is described as ‘uncertain’.
Lampton Leisure Ltd, a company wholly owned by the council, operates five leisure centres in the borough as well as an athletics track including Brentford Fountain Leisure Centre, New Chiswick Pool and the Isleworth Leisure Centre.
The £9.4 million shortfall at the company is for the period November 2020 to March 2023. A further £3.6million is now been sought to operate the centres this year under a new interim agreement between Lampton Leisure, half to be authorised straightaway and half to be drawn down by the Chief Financial Officer if needed before March 2024.
The report to the cabinet states, “There are risks around the sustainability of the current business model of Lampton Leisure Ltd, which assumes that an ongoing surplus can be delivered to repay initial loan finance from the council, and with no subsidy from the council. It is proposed that £8.0m is transferred from uncommitted funding in the Strategic Investment Reserves to the Risk Reserves to mitigate this risk.”
Lampton Leisure had managed to increase the number of memberships and pay as you go use but new joiners are generally coming in on lower tariffs and the level of room booking a the facilities is described as underperforming. This has resulted in a £0.7million shortfall in budgeted revenue for the year to March 2023 with utilities costs £0.9million over budget, despite the temperatures being reduced in pools, and an overrun of £0.4 million in staffing and maintenance costs.
The financial performance is not showing signs of improvement and in the last quarter of the calendar year 2022 there was a net loss of 920 memberships compared to a target of a net gain of 789. This was combined with a high level of cancellations and reduced room booking revenues.
It has therefore been concluded that the current year’s deficit will reach £3.6million. As well as the financial support to be provided by the council some operational changes at the centres.
Over recent months the council has been negotiating an interim agreement with Lampton Leisure Ltd for the operation of Council owned leisure centres which will govern the financial and operational relationship until such time as a longer-term agreement can be reached.
The agreement commits the council to making a payment to Lampton Leisure Ltd equivalent to the losses it has incurred operating the facilities from November 2020 to March 2023. The exact value of these losses is subject to finalising the impact this payment will have on the level of VAT that will be recoverable by Lampton Leisure Ltd.
Councillor Shaheen, Cabinet Member for Recreation, Public Spaces and Parking at Hounslow Council, said, "Leisure centres are the beating heart of our borough and we are committed to ensuring Hounslow residents lead healthier and more active lives.
"Over the past two years, Lampton Leisure has increased the number of members by 7,000 and fitness membership levels are back to pre-covid levels.
"However, leisure centres up and down the country have been severely impacted by spiralling energy costs and inflation. Like many other Councils, we are having to make choices about supporting the sustainability of our leisure provision for our residents in the short term.
"This funding is a one off and we are working closely with Lampton Leisure to move our leisure offer into a sustainable position."
The request to provide funding for leisure services comes as the latest budget report shows that overall there had been a better than expected outcome for the council’s General Fund which overspent by £2.9million against an expected deficit of £4.1million. This shortfall will also be funded from the council’s reserves which are set to shrink by £15million this year to £215million.
The main areas of financial pressures are due to increased demand for accommodation for care leavers, and rising number of young people requiring local authority care, exceptional care costs and increased staffing costs.
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