How local authorities can mitigate soaring inflation

The current economic reality poses a nasty headache for local authorities and public services, with the Local Government Association warning of a “disastrous impact”, writes Leena Gillespie of PSP.

Efficient asset management can help local authorities mitigate the impact of inflation and create new commercial and residential property assets to spark much-needed economic growth.

A challenging situation

Prime Minister Liz Truss has moved into Number 10 at a time when the warning lights on the British economy are flashing red.

Last month, the Bank of England predicted Britain would enter into a recession by the fourth quarter of this year, with the downturn continuing through to the end of 2023.

While experts are predicting the new PM’s energy plan could soften the recession, the war in Ukraine continues to rage and the pressure on the European gas market continues to grow as Putin keeps halting energy supplies to Europe.

An unprecedented challenge for our local authorities

Just like the private sector, local authorities are grappling with all of the above and more.

For councils up and down the land, the economic situation is looking particularly challenging. The cost-of-living crisis is increasing demand for public services, precisely at the same time as steepening costs and alarming – and expanding – budget black holes.

To give you some idea of the scale of the issue, a recent report from the Institute of Fiscal Studies said that the government would need to find an additional £44bn for national and public services over the coming three years just to top up spending and neutralise inflation and rises in the cost of living.

The result is that local government urgently needs to develop long-term sustainable responses to the seemingly impossible conundrum of making substantial savings while delivering ever more effective and efficient services.

Building resilience through efficient asset management

This extraordinary pressure on local authorities’ capital and revenue streams means that there is an urgent need for councils to maximise the use of publicly owned land and buildings, or to dispose of them and their associated costs as efficiently as possible.

The change in British working habits since the onset of the Covid-19 pandemic creates new opportunities for public sector bodies. With fewer council staff now working in offices across the UK, public sector bodies have a significant portfolio of underutilised office space.

A survey carried out by PwC in 2021 found that 57% of public sector organisations planned to reduce their office footprint, with three-fifths of those envisaging a reduction of between 11% and 30%.

But when in-house workforces are stretched – and we know they are across the local authority sector – the requisite technical skills and resources to operate an effective asset management system do not always still exist in-house.

This is where the private sector can support local authorities with its expertise and capability to maximise their asset potential.

PSP has a new service that offers strategic and operational asset management services for public sector clients, including: estate rationalisation, energy performance, maintenance, statutory compliance, decarbonisation strategy, stakeholder engagement, and optimisation of expenditure.

By identifying where our partners can unlock new income streams, or dispose of costly and under used assets, we are helping them optimise their valuable property resources, which in turns helps to futureproof budgets and service delivery.

These reviews also identify the gaps in available information, the costs to obtain it and the business case as to why the next stage of work should be progressed to optimise the asset.

Our highly skilled team is already helping our council partners to navigate the unprecedented economic challenges that face us and find a more sustainable way forward.

Because our asset management service is fully managed by our experienced team, it allows our partners to focus their time and resources on the other pressing challenges that lie ahead: levelling up inequalities, regenerating communities, reviving local economies, and delivering clean growth.

Efficient asset management is by no means a cure-all, but it’s a great way to build more sustainable foundations for the future and to at least mitigate the impact of the economic challenges that we all face.

• Leena Gillespie is commercial director at PSP