The impact of rising energy costs for leisure centres and swimming pools – Local Government Association briefing note summary.
A survey conducted by UK Active, an association representing leisure centres and gyms, suggests that energy costs for public leisure facilities are projected to increase by 150% for 2022 and then by 185% for 2023.
A working example for a council – In April 2021 electricity was 14.2p kw. In mid-March it peaked at 50p kw and it is currently it’s 30p kw. Which is 211 per cent rise from April 2021 levels.
In April 2021 gas was 2.32p kw. In mid-March it peaked at 21p kw; currently it’s 11p kw. At the current level it is 474 per cent above April 2021 levels.
For one local authority with four sites, this could result in between £70,000 and £130,000 in unforeseen additional energy costs being incurred per month.
With many leisure operators are already operating on a budget deficit because of COVID-19, the implications of this will mean that leisure facilities including swimming pools may face closure or at the very least reduced operating hours/services. This could have a devastating impact on the sustainability of public sport and leisure services and the economic, health and social value they generate and ultimately the health of the nation.
These rising costs cannot be met by increases to council tax alone, especially with the steep increase of living costs to households.
What are the challenges facing leisure providers?
In particular leisure facilities with swimming pools see that Energy costs are typically a leisure operator’s second highest cost after staffing costs. In addition, many leisure estates are ageing and energy inefficient, with research showing two-thirds of public swimming pools and sports halls are in need of replacing or refurbishment. Furthermore, these and ageing assets are contributing up to 40 per cent of some councils’ direct carbon emissions.
Leisure providers are trying to mitigate the costs, but they are unable to budget forecast for gas and electricity costs because the price is fluctuating erratically. This is particularly impacting providers who buy electricity and gas supplies on a day ahead rate. Providers on a fixed price contract have some short-term protection, but the risks to providers and councils are being stored up for when the fixed element ends.
Leisure providers also face eligibility issues in accessing funding to improve the take up of energy efficient measures, such as the public sector decarbonisation scheme, and the financial return of these measures are longer term and does not address the immediate issue.
Why is this important?
Leisure services run on low margins in order to ensure inclusivity, accessibility and cater for wider local need. However, it is now clear that the energy issue is now reaching a point where it is driving decisions about facility closures or reduced opening hours. This will negatively impact on the health and wellbeing of communities, the recovery and future viability of the sector and a loss of income for councils.
Leisure services make a vital contribution to the mental and physical wellbeing and social connectedness of communities. Public sport and leisure services are integral to COVID-19 recovery, supporting communities to recover from the pandemic, relieve pressures on NHS and social care services, and helping to level up the country across multiple policy areas.
What are the risks?
Leisure operator fails – When a leisure operator running services on behalf of a council begin to fail, the council faces a difficult choice. It can either allow the operator to fail, potentially bringing any facilities owned by the council back in-house as a means of keeping them open, or it can choose to support the operator.
Either approach will involve costs to the council and a significant cost to the community, as the services are likely to remain closed until arrangements can be put in place to reopen. This would also result in a loss of income during this period.
Impact on wider council priorities – Councils have a statutory duty for public health which includes the improvement of the local population’s health by contributing to healthier lifestyles and mental wellbeing, and reducing health inequalities, obesity rates and physical inactivity. Leisure services play a key role in this agenda.
Furthermore, schools cannot deliver the statutory learn to swim and water safety curriculum without public swimming pools, with 72 per cent of primary schools relying on publicly provided pools.
Leisure centres, especially those with pools, represent a very large percentage of the council’s typical carbon footprint, making these facilities a priority for decarbonisation programmes. However, progress by leisure providers on green initiatives may need to be deprioritised in response to rising energy costs, which will affect councils’ targets to reduce carbon emissions.
Site closures – Cost saving measures that could be implemented which would include the closure of sites that are old, in need of major repair works and not fit for purpose. Any further site closures that are implemented in response to rising utility costs could potentially result in sites that are in operable condition, which would affect both communities and income levels.
How can councils support their leisure partner? – The following list is provided to help councils identify their options to support their leisure provider.
The following actions will help to support a partnership and solution focused approach across councils and providers:
- Holding regular review meetings with the operator to monitor and jointly manage the issue: Due to the unpredictability and instability of utility costs it may prove more fruitful to look at the issue on a monthly or quarterly basis.
- Transparency: Leisure operators to be fully transparent about the true cost of utilities with their council partners.
- Work with providers to agree operational and contractual flexibility to help reduce and control utility costs.
- Review current arrangements around payment of the management fee to the council (where applicable): Consider using the management fee to stabilise utilities and stabilise providers to ensure service continuity.
- Consider renegotiating the repayment terms of loans to enable providers to defer COVID repayments to later years when they are more stable.
- Work with the operator to include leisure projects as part of decarbonisation projects and/or council investment in energy saving projects.