A high price for Fusion Leisure

Saving our four South Hams council owned leisure centres has cost more than a million pounds in an emergency bailout.

The money has been taken from the council’s reserves – with a warning this will impact its finances for the future. One councillor told the Pulse: “We have had to dig deep into reserves. The cupboard is now bare.” Totnes, Dartmouth, Ivybridge and Kingsbridge centres were operated by Fusion Leisure until the company went into administration on April 1st

Back in 2016 South Hams, with West Devon council, entered a 25 myear contract with Fusion Lifestyle, which was able to take advantage of the local government borrowing facility to the tune
of £6.3 million. The intention was that Fusion would repay this over the life of the contract. But when Covid struck and we went into lockdown, the centres had to close, and despite another £88,000 of council cash and £171,000 from the Government recovery fund, Fusion, a charity, has been unable to make ends meet.

prolonged period of financial difficulty.

This left South Hams and West Devon with a dilemma – to shut the doors, or find a new company. In the interim, administrators are being paid to keep the centres open until another company,
Parkwood Leisure Ltd, is handed the reins in June for an initial 12 months.

All employees at the leisure centres, including two in West Devon, are being transferred over to Parkwood, which runs centres in Torbay, North Devon and Penzance. The financial cost goes further than the emergency bail out. Unpaid management fees due from Fusion, previous shoreing-up payments and the £120,000 administrators’ costs, brings the bill to at least £1.7 million.

The figures are contained in a report which will be received by the South Hams executive this Thursday (23rd). It also has this statement from Fusion:
“‘Fusion has faced sustained financial pressure due to rising operational costs, reduced government funding and post- pandemic recovery challenges.’ Fusion said it made “significant attempts” to introduce new funding but said efforts were unsuccessful and consequently administrators were appointed. This is following a “prolonged period of financial difficulty.”

The report continues: ‘The Council has been working with specialist lawyers and leisure consultants to plan a way through what has been a fast moving and complicated process. South Hams and
West Devon have had to balance their joint objective to ensure continuity of leisure provision and no interruption for users, with the need to procure a new third- party operator within the framework of the Procurement Act 2023.’

And it concludes.
‘This will have an impact on the Council’s finances in future years which will need to be considered as part of the Medium Term Financial Strategy (MTFS), with particular reference to preparing the revenue budget for the following year, 2027/28.’

The executive is being asked to note the report.