Retrofit & Bankruptcy: S114

S114 Bankruptcy notices could be the catalyst to make English councils embrace Retrofit, how?

Retrofit & Bankruptcy: S114
EXAMPLE SUPPORT - The Devon Council Retrofit Guide

Retrofit Success - The Good News

There has been much work done in councils to support the journey towards Net Zero targets.

Excellent schemes like the Devon Retrofit guide identifying archetypes in the community and working towards solutions and advice for homeowners.

If you attended the National Retrofit Conference in the Excel in 2024 you will have heard the testimony of National Homes Decarbonisation Group members adamant that retrofit is working.

And if you listen to the feedback and look at the results they illustrated, the thousands of homes made warmer, more energy efficient, and in many cases 'classier looking' speaks for itself.

The Department for Energy Security and Net Zero (DESNZ) is responsible for spearheading the distribution of money from the Social Housing Decarbonisation Fund (SHDF), using the Social Housing Retrofit Accelerator (SHRA) service. This central government backed process is an example of retrofit change, change that is working.

National providers are accelerating their training provision and councils are stacking up their staff on training with the Local Government Association pooling resources and taking action as far back as 2021;

The Regional Retrofit Action Plan Training supports council officers to address retrofit challenges at the local and partnership level. - LGA Climate Change Programme

Initiatives, action plans, momentum. But behind all this success, learning and industry, there's been a slow rot.

And now it might ruin so much good work. Why?

Councils Are At Breaking Point - 51% Will Go Bankrupt

A survey of all English councils completed by the Local Government information Unit (LGiU) concluded that 51% of respondents in 74 councils in England believed their council would be forced to file for bankruptcy in the next 5 years. Can councils go bankrupt? Here's an explainer from the report;

Section 114 notices

A council cannot go bankrupt or into liquidation as an individual or a business can, but if a council’s chief finance officer (or equivalent) considers that in-year expenditure is likely to exceed resources available, or if there is no prospect of setting a balanced budget for the forthcoming year, he or she must issue a report (a “section 114 notice”). The issuing of a section 114 notice is generally seen as demonstrating that a council is insolvent. Government intervention usually follows very quickly, all non-essential expenditure may cease, ministers may appoint independent commissioners to take control of the council, and special arrangements to borrow or increase council taxes beyond normal limits may be put in place.

- The State of Local Government Finance in England 2024

So what does this mean for you if you're working with one of these councils? Under the guidance offered to local councils, when a S114 occurs any new expenditure is frozen, so unless you're already contracted to work there will be no effect but if the ink isn't on the contract, you're looking at a delay at the very least.

The problem for any construction process, be it house building, retrofit and even demolition, is that support for this work is not a core council function.

There is already wide spread concern about key roles in construction. There is a shortage of building control staff which in itself has ramifications for many councils. The planning departments of most councils are operating on a skeleton staff.

So if we factor in a 'lock down' on expenditure as the councils invoke a S114 how can the millions of homes needing retrofit work, the old buildings needing refurbishment and redundant structures requiring demolition still go ahead?

Councils and Commercial Activity

There has been some exemplar case studies of how councils who indulge in commercial activity can come unstuck, notably Woking and it's high rise investments.

However if you examine the different avenues councils take to raise revenue, you might, as a construction professional, notice an anomaly;

Graphic from the LGiU Report

And herein lies a possible solution for local government officers. Retrofit is a core function of the role of government if we are to achieve our Net Zero targets.

Every single local council, in England, Wales, Scotland and Northern Ireland will gain a benefit of pennies in the pound if retrofit is supported.

Retrofitting homes improves health and reduces the burden on mental health, social support and other council services because people enjoy living in warm, energy efficient affordable to live in homes - who knew?

Yet it requires just a few, tiny procedural changes in order for Retrofit support, and the roles associated with it to be included in the 'core function' of a local council.

If that change were made, the impact of S114 on retrofit would be minimal, it could even be positive...

Council Bankruptcy As Catalyst For Change

Imagine if a dynamic, supported council team identified a commercial activity, which was a retrofit task (let's name check them for anyone who might read this in a decision making position - insulation services, heat pump installation, retrofit assessments, window installers, planning assessors, builders).

A canny council official in a county with x thousands of homes needing retrofit, would partner with a retrofit company and generate an inhouse, commercially viable solution to a problem receiving millions of pounds of investment directly from central government.

You could say that central government would become the paymaster of a local council.

All under the auspices of retrofit.

There Is A Way - Talk To People

None of the problems that S114 represent to councils are unsurmountable. But with some communication they could actually work in local councils favour.

The knowledge of how to enact retrofit schemes at scale is available and shareable through resources like the UK Green Building Council and the resources and working groups at the National Retrofit Hub.

It's not the time to furl up our sails as the waters get choppy, in fact, as S114 notices increase, let's open the mainsail and ride head on into the storm, come on.