In 2021 Sefton Council became concerned about the Crosby Lakeside Adventure Centre (CLAC) in Waterloo and required a subsidy around £250,000 each year.
The centre was operated by the Council and provided water sports activities and a fitness centre. The centre also offered hospitality facilities comprising a café/restaurant, meeting rooms and hostel-type accommodation.
Sefton Hospitality Operations Limited (SHOL) was established during the financial year 2021-22, for the revitalisation of the hospitality offer at Crosby Lakeside Adventure Centre (CLAC). The water sports and fitness activities remained within direct council control.
SHOL was established as an arms-length company with a Board of directors including a Managing Director.
Through delivery of the hospitality offer through SHOL, the council intended to remove the requirement for a financial subsidy to CLAC of circa £250,000 per annum. Furthermore, in the longer-term, the business was expected to deliver a dividend to the council as shareholder.
Following a £3.6m refurbishment of the venue, funded by the Liverpool City Region Combined Authority, the hospitality venue re-opened in August 2022 under the control of SHOL. The catering facility became re-branded as The Lake House.
The Council and SHOL Board suggested that in its early years the venue would take time to establish itself and would require a council loan which the Business Plan indicated would be £200,000 in 2022/2023.
Problems began when the Managing Director resigned in September 2022 and was not replaced. SHOL then became the responsibility of just 2 Board Members, one of which was a Sefton Council Finance Officer, the other being Cllr Christine Howard. Neither have practical experience of operating a commercial hospitality and catering operation.
In December 2023, the Council’s Cabinet was informed that the trading loss of SHOL for the year ended 31st March 2023 had risen from the predicted £200,000 to £688,000. That latter figure was provisional as accounts were being finalised prior to registering them with Companies House.
On 16th January 2024, the Council’s Overview & Scrutiny Committee, with responsibility for Regeneration & Skills, will receive a report showing that the loss is not £688,000 but has now grown to £728,000.
Cllr Howard signed off the accounts to Companies House on 20th December 2023 which showed a loss of £813,580 for the year ending 31st March 2023. This financial discrepancy of almost £100,000 is not mentioned in the report to Scrutiny Committee. It can also be noted that Cllr Howard is Vice Chair of the Scrutiny Committee and one hopes that she will distance herself from scrutinising the company of which she is a Director.
This is over four times the loss indicated in the Business Plan previously approved by the Council.
A conventional private company with that sort of loss would be declared insolvent. However, Sefton Council is propping up this company by offering it a “loan.”
We do not know when the loan will be repaid (if ever), nor the terms of the loan. However, Scrutiny Committee members are being informed that the company is likely to make a loss during the next 2 financial years (the period covered by the current Business Plan). We are not told how the Council and SHOL intend to reduce the losses but instead are told that new businesses in the hospitality and catering sector take some time to become established. If that is the case, why are so many cafes and bars opening in Waterloo, Crosby and Formby which appear to be thriving, without having to rely on a loan from Sefton Council.
We are told a unit operated by SHOL at Southport Market did not prove to be financially sustainable, and was closed during the year. Additionally, a concession operated at an undisclosed venue in Ainsdale during the year was also unsuccessful and was closed at the end of the 2023 season.
The Council cannot even argue that SHOL is offering a secure employment for Sefton residents as we are told that just 49% of their employees are Sefton residents.
In addition to The Lake House in Waterloo, SHOL in Spring 2023 began operating the White House Café, alongside Southport Golf Links. They also hope to operate further venues during the next few years. We are not told where these venues will be or whether they will be sufficiently profitable to wipe out the deficit.
The key outcome of Scrutiny Committee will be to provide effective scrutiny of SHOL to give a level of assurance that both the Council’s interests in, and the services provided by, the company to Sefton residents are safe, well managed and offer good value for money.
Value for money will be hard to justify when losses have grown from £200,000 to £813,580 and with no clear undertaking of when the books will be balanced. Let’s not forget the losses in 2021 were £250,000 and that SHOL was set up to solve this problem. It has failed!
The Scrutiny Committee is being informed that the financial performance of the company did not meet the objectives set in the original business case or previous business plan. This glib statement from a Board Member of SHOL is glaringly obvious but offers no clear solution to this growing problem.
Sefton’s Labour Council have once again demonstrated that they are incapable of managing commercial operations, which is distracting them from their core purpose and putting at risk substantial amounts of public money.
Further reading: Companies House records for Sefton Hospitality Operations Ltd. https://find-and-update.company-information.service.gov.uk/company/1345…
Sefton Overview & Scrutiny Committee (Regeneration & Skills) – 16th January 2024. Item 10 https://modgov.sefton.gov.uk/ieListDocuments.aspx?CId=767&MId=11120
Sefton Council Cabinet – 7th December 2023 Item 88. https://modgov.sefton.gov.uk/ieListDocuments.aspx?CId=139&MId=11275
