Published on Sunday, 5th July 2015

 

One advantage local government has over the private sector is that it is able to borrow at very low rates of interest. This creates an opportunity to take out loans to buy income generating assets. Subject to agreement by the Full Council later this week, Portsmouth will join the growing list of local authorities across the country that doing just that and building investment portfolios. Neighbouring Fareham, for example, owns three supermarkets and a couple of shops and earns more in rent than it pays in additional debt servicing costs. 

 

The City Council administration wants to be able to borrow up to £30m to buy commercial property. There’s always a measure of risk in doing anything of course, but if a high calibre tenant is in place then it’s manageable. The surplus that will be generated will be used to cover some of the losses in government grants that will happen over the next few years.

 

Tags: Commercialisation