Agenda item

The Head of North Worcestershire Economic Development presented a report which summarised the findings of a review of the three business centres that were operated by the Council; Greenlands Business Centre, Hemming Road Business Centre and Rubicon Business Centre.  During the presentation of the report the following points were highlighted for the consideration of the Committee:

·                Management of all three of the business centres matched the Council’s strategic purposes.

·                GJS Dillon had undertaken a review in 2018 of industrial spaces in Worcestershire, which had been considered on a district by district basis.  The findings in that report had helped to inform the review of the business centres.

·                Two of the centres, at Hemming Road and the Greenlands Business Centre, generated a financial surplus for the Council whilst Rubicon Business Centre operated at a financial loss.

·                Expenditure on the business centres was higher in cases where occupancy rates were lower as the authority then had to take on greater responsibility for business rates commitments.

·                Analysis of Rubicon Business Centre had revealed that in order for the Council to break even when managing the centre with a 70 per cent occupancy rate, rents for businesses would need to be increased by a minimum of 66 per cent.

·                There was the possibility that existing businesses would be willing to agree a 66 per cent increase in their rent and Members could explore this option further.  However, there was also the possibility that this would make the Rubicon Business Centre uncompetitive.

·                The Council could take no further action, but this was not considered to be a viable option because of the significant financial losses associated with operating the Rubicon Business Centre.

·                Another alternative option could include exiting the Rubicon Business Centre lease, subject to clarifying the legal implications for the Council.

Once the report had been presented Members noted that the original intention of the business centres had been to provide start-up businesses with affordable premises until they became successful.  There was a lower level of start-up companies in Redditch compared to other parts of Worcestershire and many small businesses were located in the Borough.

During consideration of this item an amendment was proposed by Councillor Bill Hartnett.  This amendment was seconded by Councillor Greg Chance.  The amendment proposed the following:

“Consideration be given to options for improving the viability of the Rubicon Centre, including increasing the rent levels charged for both office and industrial / workshop space.”

In proposing the amendment Councillor Hartnett explained that he was concerned it would be premature to consider exiting Rubicon Business Centre at this stage.  He suggested that consultation was needed with affected tenants and all options needed to be considered before the Council vacated the property.  There was the possibility that tenants would appreciate the financial difficulties facing the Council and would be willing to increase their rents by a significant amount in order to continue to work with the authority.

In seconding the proposal Councillor Chance commented that all options needed to be explored to ensure that the business centres remained viable.  Furthermore, Councillor Chance raised concerns that Members were being asked to make a decision in respect of this subject before consultation had taken place with the tenants who would be affected.

Members discussed the amendment and in so doing noted the significant financial losses to the Council associated with current arrangements for the operation of Rubicon Business Centre.  The industry average, in order to break even when managing a business centre, involved a 65 per cent occupancy level.  However, it was noted that if the Council increased rents by 66 per cent this occupancy level would be difficult to achieve.  The increase in rent would also mean that rents would be well above market value which would potentially impact on the competitiveness of the centre in terms of attracting new businesses.  Existing businesses might also struggle with the increase in rent costs.  In addition to these points, Members noted that rather than start-up companies, 41 per cent of businesses in the Rubicon Business Centre had rented space for 10 years or more. 

On being put to a vote the amendment was lost.

Members noted that the Council would seek to provide support to existing businesses to enable them to secure suitable alternative premises for their business if needed.

A further amendment was subsequently proposed by Councillor Mike Rouse.  This amendment was seconded by Councillor David Thain.  The amendment proposed that  businesses in the  Rubicon Business Centre should be provided with no less than three months’ notice to quit.  This amendment was agreed.

RESOLVED

1)        that the review of the business centres is noted including the financial performance of the centres (two make a surplus and one makes a loss); and

2)        to exit the Rubicon Centre and that no business be given less than three months’ notice to quit.

(During consideration of this item Members discussed matters that necessitated the disclosure of exempt information.  It was therefore agreed to exclude the press and public prior to any debate on the grounds that information would be revealed relating to the financial affairs of any particular body (including the authority holding that information)).