With the growing popularity of Local Authority Trading Company (LATCo) use among councils, it is important to understand how they operate. This LocalGov ‘Need to Know’ guide explores best practice for LATCo managers, as well as the benefits, risks and incentives associated with the companies.

What is a LATCo?

LATCos are council-owned and controlled companies with the ability to trade commercially. They are not limited to providing services to council departments and can operate with greater flexibility.

An increasing number of new companies were formed following the 2011 Localism Act and the expansion of council trading powers, offering more opportunities to attract business and income.

Why councils use LATCos

Benefits of LATCos include the promise of more adaptable staffing and cost structures, improved control compared to outsourcing providers and the ability to procure external contracts to generate profit. These are particularly attractive prospects when council budgets are strained and funding reduced.

Risks and governance challenges

Among the challenges faced by LATCos are governance, financial and accountability issues, as well as management and business plan shortfalls.

Lawyers in Local Government highlight the importance of robust shareholder governance, clear oversight and effective scrutiny models to avoid failure. The guidance emphasises the three key principles of transparency, accountability and probity to inform trading conduct.

Financial issues related to VAT and borrowing can also pose problems if rules are not complied with.

Best practice for sustainable LATCos

Successful LATCos are recommended to carry out governance and performance reviews on a regular basis. Local Partnerships advises closely monitoring operations and skills, as well as company conduct, culture and structure. It is also recommended that LATCos are supported by an efficient board, including non-executive directors and chairs with appropriate levels of expertise.

This article was produced with the help of ChatGPT.

For further information, check out the Government guidance on alternative delivery models.

Expert insights will be provided at the LATCo Conference 2026, organised by The MJ and supported by media partner LocalGov.