Successes in LATCos and What Makes Them Last

Executive summary

Our previous paper examined why local authority trading companies fail. This one asks the harder question: what does success look like, and can it be evidenced? The answer is uncomfortable for everyone — councils, companies and advisers alike. Success in this sector is real, but it is almost never the success the business case promised.

Three findings shape everything that follows.

First, the financial returns are almost always tiny. Of 58 council housing companies surveyed by Inside Housing, exactly one paid a dividend in 2016/17: £15,000, from a company that had completed no homes. In August 2025 South Holland District Council announced as a milestone that Welland Homes had paid its first ever dividend — £65,953, after ten years of trading. The outliers are genuine but very rare, and the largest of them is unaudited.

Second, nobody knows the failure rate. There is no published dataset anywhere on LATCo profitability, dividends or survival. Not from CIPFA, the LGA, APSE or government. A sector of more than 850 companies employing roughly 5% of the local government workforce has essentially no aggregate performance measurement.

Third, the strongest performers are not the commercial ventures. The best-evidenced success in the sector is Achieving for Children, which has taken two of its three owning boroughs to an Ofsted rating of Outstanding — and which pays no dividend at all, by design.

Taken together these point to a single conclusion: most councils are measuring the wrong thing, and measuring it too rarely. Where companies are judged against a financial return they were never structurally capable of producing, genuine operational success goes unrecognised and genuine deterioration goes undetected. And where a company does succeed, that success proves strikingly perishable — this paper documents three companies that returned real money to their councils and are now paused, restructured or dismantled.

Sections three and four set out what durable success actually looks like, including a paired comparison of two companies owned by the same council in the same year with opposite outcomes. Section five examines a success closer to home — the company outperforming every other in this paper, and the exit question now arriving for it on a statutory timetable. Section seven distils nine marks of a durable LATCo, mapped to the twelve modules of the Nullam Method. Section eight sets out the questions a shareholder should be asking, which cost nothing and are answerable today.

1. The question nobody can answer

There are more than 850 local authority trading companies in the United Kingdom, owned by over 60% of councils and employing roughly 5% of the local government workforce — around 80,000 people. That is UNISON’s FOI-based count from January 2025; Grant Thornton’s 2018 census put the figure at 743 across 59.2% of councils. Academic work by Ferry and colleagues recorded a 50% increase in local authority subsidiary entities between 2010/11 and 2016/17.

Now ask a simple question: how many of them are profitable? What proportion have failed? What is the median return to a shareholding council?

There is no answer. No published dataset exists on LATCo profitability, dividend flows or survival rates — not from CIPFA, not from the LGA, not from APSE, not from government, and not from the audit firms that write about the sector. The nearest thing to an aggregate figure is the National Audit Office’s 2019 finding that revenue profits from all local authority commercial activities rose 36.3% in real terms to £404m between 2010-11 and 2017-18, a figure which covers trading accounts and property as well as companies and therefore cannot be attributed to LATCos.

The academic literature is equally thin. Reviewing the field in Public Administration in 2022, Andrews, Clifton and Ferry concluded that evidence on the effectiveness, efficiency, economy and equity of corporatised provision is “still severely lacking,” and that research on corporatisation “lags significantly behind” research on privatisation. International findings contradict one another: Spanish research found corporatised bodies do not deliver cheaper services, Dutch research found the opposite, and Swedish research found no effect on citizen satisfaction.

Even the best-measured service does not settle it. The Competition and Markets Authority examined waste collection in 2017 and found “no evidence that authorities whose collection services are delivered in-house pay any more or any less than those who contract the service out.” That cuts against outsourcing and insourcing claims with equal force.

There is a further measurement trap. UNISON’s data records more than 850 companies but only 384 that directly employ staff — fewer than half. Inside Housing found 34 of 58 housing companies had delivered no homes at all. And as Matt Marsh of Anthony Collins has written, councils frequently choose dormancy over dissolution, because a dormant company stays on the register and can be reactivated. Companies House “active” status is therefore an unreliable proxy for survival: a substantial dormant tail sits inside the headline count, and failure is invisible within it.

This matters for a board far more than it matters for a researcher. If no benchmark exists, a company cannot know whether it is performing well, and a shareholder cannot know whether to be worried. In the absence of external comparison, the only reliable reference point available is the company’s own position measured consistently over time — which is an argument for structured internal assessment, not an argument against measurement.

2. What success actually means

2.1 Two different animals, one test

The most consequential error in this sector is applying a single definition of success to two fundamentally different structures.

A Teckal company — since February 2025, a “vertical arrangement” under Schedule 2 of the Procurement Act 2023 — exists to deliver services to its owning council without competitive tender. It is not market-facing. More than 80% of its activity must be for its owner. Its purpose is reliable delivery, control and cost, and success means the service is better or cheaper than the alternative. A commercial trading company is outward-facing, operates at arm’s length, must recover all support costs from trading revenue, and is subject to corporation tax, VAT and competition law. Its purpose is profit.

The LGA set this distinction out clearly in Enterprising Councils. What is striking is that the two most prominent recent pieces of governance guidance — Local Partnerships’ “LATCos: the new vision” of December 2023 and CIPFA’s Practice Oversight Panel advisory note of January 2023 — prescribe essentially one governance model for both, without distinguishing them. Browne Jacobson is among the few to say plainly that “a greater degree of delegation by the shareholder to the company will normally apply where the company is a ‘pure’ trading company rather than a Teckal company.”

The practical consequence is that Teckal service companies are routinely judged on dividends they were never designed to generate, while their actual performance — service quality, cost against the counterfactual, resilience — goes unmeasured. It is the wrong exam paper, and companies fail it for the wrong reasons.

2.2 The dividend evidence

Inside Housing surveyed more than 200 English councils by FOI and found 49 councils had established 58 housing companies, subsidiaries and joint ventures since 2012. Between them they had delivered 528 homes, none for social rent, and 34 of the 58 had delivered nothing. One company paid a dividend in 2016/17: Daventry Estate Company, £15,000, registered in November 2012 with £1,000 of capital, with zero completions to its name.

Nine years later the picture has improved only marginally. In August 2025 South Holland District Council announced that Welland Homes had delivered its first ever dividend of £65,953, after ten years of operation and on a portfolio of 57 market rental properties. Revealingly, the council’s own announcement led on a different number: £569,607 donated to local charities cumulatively. The social return was an order of magnitude larger than the financial one, and the council knew it.

The table below lists every dividend this research could verify. It is, so far as we can establish, the most complete such list in public circulation — which is itself a comment on the state of sector reporting.

Every figure is drawn from filed accounts, council committee papers or council announcements. Figures described as “group revenue” or “shareholder value” have been excluded, because they routinely bundle loan interest, service-level agreement surpluses and contract benefits alongside actual dividends.

2.3 The expectations problem

Grant Thornton’s sector benchmark is worth setting against the business cases that created these companies: savings of 10–15% after 18 to 24 months, and profits unlikely in the first three years. Measured against that, a great many LATCos are not underperforming at all. They are performing roughly as a realistic case would have predicted, against a business case that promised something else.

CIPFA names the mechanism directly in its advisory note, listing among the causes of failure “weak options appraisal, meaning that the rationale for creation is poor, plus optimism bias.” The gap between the case and the benchmark is not usually fraud or incompetence. It is an unexamined assumption, made once, at the moment of maximum enthusiasm, and never revisited.

3. What good actually looks like

Four companies survive close scrutiny of their filed accounts and independent validation. They have little in common commercially, which is itself instructive.

3.1 Achieving for Children — the strongest case in the sector

A community interest company owned by Kingston (40%), Richmond (40%) and Windsor & Maidenhead (20%), incorporated in February 2014 and trading from that April — a twelve-year record. Turnover of £268.3m in 2024/25, up from £242.7m, with 1,750 employees.

The financial performance is modest and declining: trading profit of £0.490m in 2024/25, down from £2.397m. It has never paid a dividend and never will, because it is constituted not-for-profit with surpluses earmarked for reinvestment. On any conventional commercial test it would be marked down.

On the test that matters, it is the outstanding performer in the sector. Kingston was rated Outstanding by Ofsted across all five areas in 2025, its second consecutive Outstanding. Richmond was rated Outstanding in August 2025, up from Good in 2022. Windsor & Maidenhead is rated Good. Both improving councils name the company explicitly as the delivery vehicle. This is independent, statutory, externally imposed validation of the kind no award scheme can replicate.

For balance: Ofsted’s 2020 inspection of Windsor & Maidenhead criticised staffing churn, inconsistent care planning and record keeping. The trajectory has been upward, but it was not uniformly so.

3.2 Milton Keynes Development Partnership — the cleanest financial record

Formed in 2013 to acquire Homes and Communities Agency land, funded by a £31.6m loan from Milton Keynes City Council. The £31m loan was repaid in full in 2023. It paid a dividend of £2.563m in 2024/25, holds assets valued at £156m, and projects capital receipts of up to £70m between April 2024 and March 2027.

The council’s own review found no auditor criticisms and “no material uncertainties relating to events or conditions” affecting viability. A council company that borrowed from its shareholder, repaid the borrowing in full, and now pays a recurring dividend without audit qualification is genuinely rare — and it is worth noting that it took a decade.

3.3 Commercial Services Group — scale, with a caveat about the headline

Kent County Council’s group traces to a county supplies function of the 1930s; Commercial Services Kent Ltd was incorporated in 2006. It runs 32 trading brands with more than 1,800 staff and declared dividends of £5.5m in 2024-25 and £3.1m in 2023-24, on profit after tax of £9.45m.

A caution that applies to any paper citing this company. CSG is frequently described as a £700m or £800m business. That figure is gross revenue including joint ventures; net revenue is £185.4m, and the principal trading entity turns over £80.7m. A second entity, Commercial Services Trading, recorded a £701k loss. The dividends are real and substantial; the turnover headline is not what it appears, and repeating it uncritically will cost credibility with any reader who checks.

3.4 Oxford Direct Services — the best-evidenced social value case

A Teckal service company that nonetheless pays a real dividend — £1.9m for 2023/24, on a combined surplus of around £3.3m, with roughly £19m forecast across four years alongside the council’s development company. It employs 560 people directly.

What distinguishes it is the quality of its evidence. Its economic and social impact assessment was commissioned from SQW, an independent public policy evaluator, rather than self-reported: £65.6m total GVA, 1,154 jobs supported of which 728 in Oxford, £35.3m of UK supplier spend with over half in Oxfordshire, 15 apprentices of whom 73% are aged 21 or under, a gender pay gap of under 15.5% in women’s favour, and carbon emissions down 63% since 2014/15. It won Best Workforce Initiative at the 2024 APSE Service Awards.

Even here, a limitation worth naming: the assessment measures gross impact, not additionality against what would have happened otherwise. That is the standard weakness of social value reporting across the sector, and it applies to the best example as much as the worst.

3.5 Three that do not stand up

Honesty requires naming companies commonly cited as successes that the accounts do not support.

HTS (Harlow) Ltdrecorded a profit after tax of £6,536 on turnover of £29.1m, has never paid a dividend, and by the third quarter of 2024/25 had 2,904 outstanding repair jobs, around half of them more than two months overdue, together with a financial recovery plan aimed merely at reaching break-even. Harlow Council began a transformation programme in August 2023 because “too many tenants and residents feel that the council and HTS does not deliver for them,” citing weak board expertise among the causes.

Corserv (Cornwall)posted losses before tax of £4.62m and £4.55m in consecutive years and received a £30m equity injection from Cornwall Council in March 2024 to refinance it. Its own website states that “any profits made by the group are returned to the council as a dividend,” while its annual report confirms no dividends and a substantial bailout. The gap between marketing and accounts is the point.

Big Sky (South Norfolk)made a consolidated loss of £1,389,516 in 2024/25 against a prior-year loss of £775,626, and the council recognised an investment impairment because the company’s net asset value had fallen below the share capital value.

4. Bristol against Bristol

The most useful comparison in the sector requires no adjustment for council size, political control, region or era, because both companies were owned by the same council and incorporated within days of each other in March 2015.

Bristol Waste was incorporated on 5 March 2015. Both companies had the same shareholder, the same officer cadre and the same political oversight.

The difference was not governance quality in the abstract, and it was not management competence. It was whether the company had a reason to exist that did not depend on beating the market. Bristol Waste performs a function the council is statutorily obliged to deliver and would have to procure from someone. Bristol Energy was required to win customers from national suppliers with vastly greater scale, better hedging and lower cost of capital, on the strength of a municipal brand.

This is the single most transferable lesson available. Before any governance question is reached, there is a prior one: what is this company’s durable competitive advantage, and does it survive contact with the market it will actually operate in? Bristol’s energy business plan was described by auditors as “an overly unrealistic view.” Its waste business plan did not need to be optimistic, because the demand was already there.

One honest caveat. Bristol Waste discloses turnover, net assets and headcount, but its published impact report omits profit and makes no reference to any dividend, and we were unable to verify either. Its operational claims — £8.4m of disposal cost savings, 64,289 tonnes recycled or composted, 1.5% to landfill — are the company’s own. The survival contrast is solid; the profitability contrast is not evidenced, and we do not assert it.

5. Success closer to home

I first became aware of Gateway14 Limited, owned by Mid Suffolk District Council, at the LATCo conference in March 2026, through a very engaging session from Sir Christopher Haworth, its chair. It follows a similar pattern to a number of the other successes: it is a LATCo with a clear purpose. The more LATCos I review, the more a clearly defined purpose becomes a recurring theme in the successes — and the lack of one a contributing factor in the failings.

5.1 The performance

Gateway14 Limited was incorporated in November 2017 to develop a 150-acre site at junction 50 of the A14 at Stowmarket. It is held through an intermediate holding company, MSDC (Suffolk Holdings) Ltd, which the council owns. It is a commercial vehicle rather than a Teckal company: its business is speculative development, plot sales and lettings to third parties, so it could not satisfy the 80% activity test.

In 2024/25 it paid Mid Suffolk a dividend of £20m, followed by £6.281m in 2025/26 against a budget of £2.9m, plus a £1.6m capital receipt representing a return of previously invested equity. The council’s reserves rose from £29m to £50.6m in a single year, and it borrowed less than budgeted because the dividend overshot. The carrying value of the holding company on the council’s balance sheet moved from £16.6m in 2023 to £53m in 2026.

That single £20m dividend is larger than every other dividend in this paper combined, and it is roughly three hundred times the sum Welland Homes announced as a milestone.

5.2 The exit problem, arriving on a fixed date

In March 2026 the Government confirmed three unitary authorities for Suffolk. Mid Suffolk District Council will cease to exist on 1 April 2028, and its area will be divided between two different successor unitaries. A single, indivisible company is held through a holding company whose only shareholder is being abolished and whose territory is being split in two.

In January 2026 a councillor — himself a former director of the company from incorporation until 2023 — moved a motion to explore ring-fencing the proceeds for Mid Suffolk residents, on the grounds that they had shouldered the borrowing risk. It was defeated by 22 votes to 7, with officers advising of legal difficulty. The Annual Governance Statement commits only to “a review of company structures and business plans to prepare for Local Government Reform.”

This is the exit question from section seven, arriving on a statutory deadline two years out, with no evaluated option on the table. It is not a failure of management. It is the risk that Barking and Dagenham encountered in a different form: a company can be constrained, restructured or dismantled by something happening entirely on the shareholder’s side of the relationship, which no amount of company-level performance monitoring will detect. Almost no LATCo governance framework asks about it.

This has, of course, now been paused (or possibly cancelled — who knows?) following the announcement by Angela Rayner, which in a way reinforces the point: outside factors and risks can derail a LATCo’s purpose and strong performance.

6. Why success is provisional

The most important finding of this research is not that some LATCos succeed. It is that success does not hold still. Three companies that returned real money to their councils have since paused, restructured or dismantled the arrangement that generated it — and in each case the deterioration was rapid.

6.1 Aequus, Bath and North East Somerset

Formed in 2016/17, Aequus returned £7.9m to the council across five years to 2022 and delivered more than 280 homes. It was, correctly, held up as a model.

By 2025/26 the council was recording “significant challenges”: reserves depleted, dividend payments paused — creating an annual pressure of roughly £0.65m on the council’s own budget — £156,333 provided from the capital budget, a further £181,677 for overheads drawn from the commercial income risk reserve, a time-limited director indemnity granted, staffing and operating costs cut by over 20%, and a relocation to shared accommodation. A company can move from exemplar to rescue case inside three years.

6.2 Essex Cares — an 89% fall in one year

ECL supports more than 13,500 customers with over 1,260 staff and has won a Municipal Journal award for inclusive employment. Its 2023/24 results were the best since 2009. The following year:

A company can lose 89% of its profit and 89% of its dividend in twelve months without any governance failure being alleged. Note also that ECL is frequently described as “CQC Outstanding” — that rating applied to one regulated service in 2019; its current registered services are all rated Good.

6.3 Be First — success constrained by the shareholder, not the company

Barking and Dagenham’s development company returned a cumulative £50.4m to the council, including £7.5m in 2024/25, and has delivered more than 3,700 homes. By any ordinary measure it worked.

In February 2025 the council resolved to streamline it under greater council control and pivot away from direct delivery. The stated reason is the crucial detail: the original model, which earned fees on schemes funded by council borrowing, “is no longer viable because the Council is nearly at its capital borrowing limit.” The council carries around £1.6bn of debt, over £1bn of it regeneration borrowing, at £20–30m a year in interest.

The company did not fail. Its shareholder ran out of balance sheet. This is a risk no amount of company-level performance management will detect, and it belongs on the company’s risk register as much as the council’s — a point almost no LATCo governance framework currently makes.

6.4 The uncomfortable corollaries

Two further findings deserve to be stated plainly rather than managed around.

The workforce question.UNISON’s Trading Places research found that over half of responding LATCos do not follow council pay scales, and over half do not use the Local Government Pension Scheme or use it only for transferred staff; fewer than half of large companies give all staff LGPS access. Meanwhile APSE’s own material lists, among the advantages of establishing a LATCo, a “lower pensions model” worth an estimated £3,000 to £4,000 per employee. The saving and the detriment are the same number, described by two different authors. A board that has not decided, explicitly and on the record, where it stands on that trade-off has not made a decision — it has inherited one.

Success is sometimes not financial at all.When Islington insourced housing repairs, the change cost the council an additional £4m annually plus £2–3m one-off — and customer satisfaction rose from around 50% to approaching 90%. It is regarded as a success. Similarly, when four councils insourced Publica in 2024, Local Partnerships conceded that “it may be difficult to quantify any short/medium-term savings.” If the sector’s own definition of success routinely includes spending more money, then measuring these companies by dividend alone is not merely incomplete. It is measuring something nobody is actually trying to achieve.

7. The nine marks of a durable LATCo

Our companion paper identified nine recurring failings. The successful companies examined here suggest nine corresponding marks of durability. They are not aspirations; each is a testable condition, and each maps to a module of the Nullam Method.

Three modules do not appear above because no case in this research turned on them, which is worth saying rather than padding the mapping. Procurement & Contract Management governs the Schedule 2 vertical arrangement on which every Teckal company’s legality rests — a compliance floor rather than a success factor. Legal, Compliance & Ethics and Transformation & Change Readiness likewise protect against failure more than they generate success. All three are necessary; none is sufficient.

8. Conclusion

There is no external benchmark for LATCo performance, because no such dataset exists. In its absence, the only meaningful comparison available to a board is with itself, measured the same way, a year apart. A company that cannot answer the question “When did we last assess this company against a consistent framework — and can we compare the result with last year’s?” has no way of knowing whether it is the next Aequus or the next Milton Keynes Development Partnership — and, on the evidence assembled here, neither has its council.

The Nullam Method exists to make that comparison possible: twelve modules across five layers, scored red, amber and green, producing a gap analysis and an action plan, and designed to be re-run so that movement can be evidenced. It is not independent assurance and should never be presented as such. It is the structured, repeatable self-examination that the durable companies in this paper practise instinctively, and that the rest of the sector has no instrument to perform.

Sources

All figures are drawn from filed accounts, council committee papers, statutory inspection reports or published research. Principal sources are listed below.

This paper is published by Nullam and is a companion to “Failings in LATCos and the Lessons to be Learnt”. The Nullam Method is a self-assessment framework for local authority trading companies. It is not a substitute for independent audit, legal advice or professional financial advice.