Purpose

Upon the completion of all due diligence this
report aims to confirm the progress with the transferring of
services from LSSL to the Council

Decision

For the reasons set out in this report and in
accordance with the authority delegated by Cabinet, the Corporate
Director of Neighbourhoods & Housing has decided to:
1)   
Grant authority for the transfer of the Liverpool Streetscene Services Limited (LSSL) business and
operations to the Council with effect from 31 October 2025 (subject
to completion of all relevant legal documentation).
2)   
Grant authority for the Council to enter into an asset purchase
agreement with LSSL in order to
effect the transfer of the business and
operations, together with any ancillary agreements required for
this purpose (to include agreements required to discharge the legal
charges over LSSL).
3)   
Approve the termination of the Council’s contracts with LSSL
for recycling & waste management, street cleansing, grounds
maintenance, bulky waste collection and some highways services and
approve delivery of all the above functions directly by the Council
effective from 31 October 2025.
4)   
Enter into a subscription agreement with LSSL to subscribe for new
shares in the company, up to the value of £5m, for the
purpose of recapitalising the company because of the company
carrying historic liabilities from debts it took on when it was set
up by the Council in 2015.  This
in order to support the transfer of
assets at net book value from LSSL to the Council and to assist in
the completion of the company’s final accounts.
5)   
Grant authority for the Council to novate all relevant existing
contracts for the supply of goods and services from LSSL to the
Council, where this is required to ensure continued supply of
necessary goods and services to the Council pending a review and,
where applicable, reprocurement of the
goods and services.
 

Alternative options considered

1.1          
Retaining LSSL as a wholly owned company - this option was
rejected based on the conclusions of three independent reviews
which recommended significant improvements to governance and
contract management of the company. As a company wholly owned by
the Council, as the shareholder, the Council ultimately assumes the
full risk of any service failures (even though the service is
delivered by an arm’s length company). This also includes any
staff or management disputes, as well as commercial risk related to
any increase in operational costs.
1.2          
Although operating LSSL as a wholly owned subsidiary has enabled
the company to trade commercially. As a result of the company
having to absorb inflation and budget reductions between 2016
– 2022, the trading has been insufficient to prevent the
company trading at a loss. (However, the stated loss relates to an
inherited pension shortfall liability passed over to the company
during its inception from the previous service provider,
Enterprise-Liverpool Ltd.)
1.3          
The impact of a lack of contract indexation and budget savings has
restricted LSSL’s ability to absorb further inflationary
pressures and in recent years the Council has been required to make
additional payments to enable the company to balance its accounts.
This ultimately begs the question if the Council, as shareholder,
holds all the risks and is now required to financially support the
company, is there any value in operating it compared to taking on
full control, with full oversight of all operational and strategic
decision making.
1.4          
Operating a hybrid company with services to residents
transferring to the Council and retaining LSSL for commercial
trading purposes - although it was initially recommended that
LSSL be retained for up to a year to continue to deliver traded
activity which would be subject to a separate review by the
Council’s Companies Governance Board. Obtained a specialist
legal and financial advice as part of the necessary due diligence
work to support this decision has required a change in this initial
recommendation.
1.5          
The detail of the legal and finance advice which has informed the
change in the initial recommendation is set out below in paragraph
6.1.