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Managing the impact of higher energy costs on community leisure provision

Managing the impact of higher energy costs on community leisure provision – a guide for local authorities

Introduction

We understand that many leisure operators are concerned about rising energy costs. 

This guidance is designed to help local authorities who’ve have outsourced the management of their facilities to external operators to consider the actions they can take to help mitigate the impact and risk associated with this situation.

It may also help local authorities that manage their leisure facilities in-house and leisure operators. 

The hints and tips contained within these pages are drawn from discussions with multiple leisure operators and local authorities across England.

We recognise that many local authorities and leisure operators are already taking action to mitigate the impact of rising utility costs. For these organisations, the actions contained within this guidance may provide a helpful checklist for comparison.   

The government has announced a financial support package for communities and businesses to deal with the rising energy costs.

Further information is to be provided by government regarding the details of this and the impact on local councils and operators. It should be noted, however, that the approach to managing the impact of higher energy costs and the mitigation actions contained within this guidance remain valid.

A spinning class at a gym

Background

Energy costs represent a large proportion of a leisure facility’s operating budget - typically the second highest cost after staffing - and are forecast to significantly rise to make up around 20%-25% of expenditure by 2023 based on current projections.

There are different contracting arrangements across the sector regarding where the risk and liabilities sit in relation to energy costs, and addressing these will be a challenge whatever operating model is in place.

Whilst local authorities recognise the significant health and wider social value benefits that sport and leisure provision deliver, the impact of rising energy and other costs across the wide portfolio of statutory services that local authorities have to deliver will severely restrict their ability to provide additional support to cover rising costs in sport and leisure facilities. This will happen regardless of the local delivery model or contractual arrangements around utilities.

Some councils have already made the transition to low-energy, sustainable facilities, and this may be an opportunity to accelerate plans for the rest of the leisure estate.

The importance of the service provided by the leisure sector, its contribution to keeping communities healthy, and the wider social value it creates upfront is of great importance and it mustn’t be overlooked.  Please check the LGA/ukactive Briefing note for councils  about the impact of rising energy costs on the leisure sector by the Local Government Association, which also encourages partnership working between LAs and operators to mitigate the risks associated by the increase of energy costs.

Be proactive 

There’s a very real risk, without additional support and mitigating actions being put in place, that the energy cost crisis may jeopardise the sustainability of leisure contracts and ultimately your leisure facilities stock. It’s therefore important to:

  • Recap and ensure there’s clarity and understanding on your contractual arrangements, including the terms and conditions of your contracts, and find out whether there are any utility tariff protections, cap and collar, or energy benchmarking conditions in place. Being fully informed of the detail of the contractual arrangements will help prepare your authority for any negotiations with your operator and/or any financial adjustments to the contract.
  • Be proactive in working with your leisure operator to work through what it means for them and their wider portfolio, as well as your contract, and what action can be taken to mitigate the impact of higher energy costs. Consider liaising with other local authorities that have the same operator to be fully aware of the impact on the operator’s business.  
     

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