Councils are increasingly turning to commercialisation to escape austerity, a business model that has brought added moral dilemmas, report finds.

A Zurich Municipal study, published yesterday at the SOLACE Summit in Manchester, looks at the challenges and opportunities faced by decision-makers at the top of the UK’s local government sector.

Based on a series of interviews with 22 council chiefs across England and Scotland, it revealed some councils were breaking free of the ‘inertia of austerity’.

However, the report — entitled Why are we here? The 2017 Senior Managers’ Risk Report — also found many authorities were still being forced to cut services to fit Government funding in the short-term.

Two-thirds of planned reductions have already been made and many local authorities are unable to cut further, the report’s authors found.

This has encouraged many councils to adopt new business models in order to compensate — and commercialisation has been a popular direction to go in.

For some councils, according to the report, turnover, investment and business planning is akin to a FTSE 250 company, with one council chief admitting to a £1.5bn annual turnover.

However, there are dilemmas at ‘almost every turn’, Zurich Municipal warns.

‘Councils are facing challenges from all sides, and many are employing commercial ventures to mitigate some of the lasting effects of austerity,’ said Rod Penman, head of public services at Zurich Municipal.

‘This approach is not without its challenges, however. There is the growing potential for moral and commercial dilemmas at almost every turn, and it is clear that council chiefs are concerned about the long-term relationship between national and local government.

‘Britain faces a ticking demographic time bomb and local government has no choice but to work towards developing income streams to match existing and future demand.

‘Councils must therefore improve the narrative around the choices they are having to take – framing decisions in a purely commercial light simply isn’t an option when the social value of public bodies and services has to be factored in.’