Questions raised as Harrogate Royal Baths loses £2.5m in value

The value of Harrogate Royal Baths has fallen by £2.5m since it was acquired as a commercial investment by North Yorkshire County Council in 2018.

A council report reveals the Grade II listed building, built in the 1890s, was valued at £7m in March this year, compared with £9.5m when the local authority bought it. The council paid £9m but was prepared to pay £10m.

The report also reveals the Baths had only generated a 1.82% return on investment by September 30, which marked the end of the second quarter of the financial year.

The depreciation of the asset, along with the low rate of return on investment, has sparked fresh questions about the council’s decision to buy the Baths and its ability to manage commercial assets.

Last year Conservative county councillor Richard Musgrave said he was “absolutely speechless” to learn the council had paid £9m, adding “the performance looks very, very poor” and describing it as a “trophy investment”.

Speaking about the latest figures, Cllr Stuart Parsons, leader of the council’s Independent group, said local authorities should aim for investment returns of between five and 10 per cent and although times were hard the 1.82% figure was not acceptable. He added:

“The main problem is local authorities should not really own these properties because they don’t know what they are doing.

“I just don’t think there’s enough commercial nouse in the local authority to be running these sites.”

Harrogate Royal Baths

Figures contained on p134 of the council report.

Cllr Parsons said the new North Yorkshire Council, which comes into existence in April, should “hire proper commercial people” to run key assets like the Baths and the loss-making Harrogate Convention Centre, which he said had been “a millstone around Harrogate Borough Council‘s neck for a long time” and in danger of becoming a “white elephant”.

He added:

“This should be the last chance. Give commercial people a couple of years to turn them around and if they can’t, the council should think about disposal. There has to be a proper policy.”

‘Severely impacted by covid’

Asked about the latest figures, North Yorkshire County Council’s corporate director for strategic resources, Gary Fielding, said:

“This particular investment was an opportunity to invest not only for a direct financial return but also in our locality. To the end of the last financial year, returns have been in excess of our standard treasury investments. The issues experienced have been the result of a global pandemic and more recently other issues beyond UK borders.

“Investments are made for the longer term — balancing risks that can reasonably be foreseen and having sufficient cash flow and reserves to deal with shorter term shocks.

“As we move towards a new unitary council from April 1, 2023, we will see the freehold of Harrogate baths pass to the new council. Whilst the investment from North Yorkshire County Council will cease at this point, the ongoing relationships with tenants will continue.”

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Mr Fielding indicated the council would take a tougher line on commercial tenants to maximise income.

“The hospitality sector has been severely impacted by the covid pandemic and the council has done all it reasonably can to support its tenants through these difficult times for the benefit of the local economy and taxpayers generally.

“We work with our tenants to understand their circumstances in order to maximise the income into the council. However, it is not the council’s responsibility to support tenants indefinitely, and if businesses are not sustainable then we work with tenants to bring tenancies to a close.

“We have seen improvement over the last six months which is encouraging. However, with the ongoing cost of living crisis, the hospitality sector may unfortunately experience further pressures.”