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04
Jan 2022
Harrogate's Royal Baths: the council's under-performing 'trophy investment'
An investigation by the Stray Ferret has revealed that Harrogate's Royal Baths have massively under-performed as a commercial investment since they were bought by North Yorkshire County Council in 2018.
The council bought the Grade II listed building for £9 million in 2018 as part of a wider strategy to become more entrepreneurial to plug its declining budget from central government.
But the Baths have only generated about a third of the income expected, raising questions about the wisdom of the decision to buy it, as well as whether the council has the necessary business acumen to invest taxpayers' money in such schemes.
The council was accused of making a "trophy investment" last month when one councillor said he was "absolutely' speechless" by the £9 million sum paid for the Baths.
It has now emerged that rental income is way down on what was predicted in a confidential report to councillors before they agreed to buy it.
Prepared to pay £10m
The report, which has now been made public, reveals the council was prepared to pay up to £10 million for the Baths, which included four commercial units.
At the time, they were J D Wetherspoon, The Potting Shed bar, the Viper Rooms nightclub and Royal Baths Chinese Restaurant. The Potting Shed subsequently closed.
The report forecast the Baths would generate annual income of £500,940.
But gross income received in the three years since then was just £613,000 — way down on the £1.5 million expected. The council has also incurred maintenance and other costs of £222,000 on the Baths to the end of March 2021, further reducing the income figure to £391,000.
Read more:
- Council accused of 'trophy investment' for £9m purchase of Harrogate's Royal Baths
- Royal Baths Chinese Restaurant reveals plans to re-open
- Council warns of ' financial pressures' despite government funding
Philip Broadbank
Councillor Philip Broadbank, a Liberal Democrat who represents Harrogate Starbeck on the county council, said
'It will end in tears'
The council has not been helped by lockdowns, which have affected all three surviving businesses. The Royal Baths Chinese Restaurant remains closed but plans to re-open this year.
Stuart Parsons
Nevertheless, Councillor Stuart Parsons, who represents Richmond and is the Independents group leader at the county council, said the financial performance of the Baths was worrying and predicted the council's attempts to generate income in new ways would "end in tears". He said:
He said the council had been "absolutely strapped for cash by central government for 11 years" and was being encouraged by ministers to find new sources of income to "shore up shortfalls". But he added:
Cllr Parsons added it was concerning that major spending decisions involving taxpayers' money were being made on the basis of such inaccurate forecasts.
North Yorkshire County Council offices in Northallerton.
Councillor Gareth Dadd, deputy leader of the Conservatives on the county council, has been one of the key supporters of the Baths investment.
The Stray Ferret sent him some questions but he did not reply.
'Better than treasury returns'
A council spokesman said it received legal advice and a surveyor’s report and undertook comparative market analysis to support the business case and necessary due diligence before buying the lease on the Baths from M&G Property Portfolio.
He added the investment "continues to stand up against the alternative investment opportunities where cash returns amounted to an average return of 0.19% p.a. at Quarter 2 21/22".
Gross income received to the end of 20/21 was £613,000 and standard treasury returns would have generated £152,000, the spokesman added, and therefore the investment "has realised £461,000 of additional benefit to the council and its taxpayer when compared to our standard treasury returns".
He added covid and lockdowns had had a significant impact since the Baths were bought in 2018.
Besides the four commercial units, the purchase of the Baths also included two further units held on long-leases by Harrogate Borough Council at a peppercorn rent occupied by the tourist information centre and the Turkish Baths, as well as two car parks similarly let on long leases at nominal rents.
The council set up the Brierley Group of firms, ranging from house builders to lawyers, in 2017 to bring together council-owned companies and find new ways of making money. However, last year it reported a loss of £639,000.
Further losses are forecast for the current financial year.
The council warned last month it faces “enormous financial pressures” and needed to find £19 million in savings.
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