Ten pitfalls local authorities must avoid when implementing the leisure agency model

The leisure agency model continues to gain momentum across the local government sector. Driven by financial pressures, evolving VAT considerations and a desire for greater flexibility, many authorities are exploring whether the agency model could offer a more sustainable way to deliver leisure services.

On recent projects such as the Kingston procurement project, the agency model may work well. However, on projects with significant lifecycle risk transfer such as design, build, operate and maintain responsibility (DBOMs) with a complex works phase – like the Basingstoke and Deane Borough Council approach – such a delivery model may be less appropriate during the works phase.

The agency model can offer significant benefits, but it also introduces new, but often navigable, complexities in governance, risk allocation and procurement.

Set out below are 10 key considerations for local authorities assessing whether the leisure agency model is the right fit.

1. Not aligning the delivery model with their strategic objectives

Any decision should start with a clear understanding of the authority’s long-term objectives. These may include improving financial resilience, enhancing service quality, supporting health and wellbeing outcomes, or enabling capital investment in new facilities.

Large-scale programmes such as the Basingstoke and Deane procurement demonstrate how delivery structures must align with broader ambitions for community infrastructure and regeneration. Not incorporating an agency approach during the works phase does not prevent incorporating such an approach as a change during the services phase, subject to procurement law considerations. Procurements should be designed with such end in mind if such an option is to be reserved by the authority.

2. Focusing on just the VAT savings

VAT continues to be a key driver behind interest in the agency model. However, the position is complex and evolving and gains in one tax efficiency should not be at the cost of other tax efficiencies such as business rate relief. The financial benefits will depend heavily on how the model is structured and operated in practice.

Authorities should take early specialist advice to ensure that any anticipated tax efficiencies are robust, realistic and sustainable.

3. Letting the operator dictate the balance of risk

The agency model could, if not careful, change the balance of risk between the local authority and the operator detrimentally. Authorities need to carefully assess where responsibility would sit for financial performance, operational delivery and service outcomes.

This is particularly important in complex contractual arrangements, where multiple delivery elements may intersect with wider infrastructure or capital programmes. Preservation of contractual risk transfer is also key to managing procurement risk.

4. Underestimating the procurement implications

Adopting an agency model – particularly as part of a wider leisure transformation – can involve a detailed and resource-intensive procurement process.

Experience from recent procurements highlights the need for:

Clearly defined evaluation criteria
Structured dialogue with bidders
Careful management of multi-stage processes

Early planning and the right advisory support are essential to achieving a successful, risk managed, outcome.

5. Locking the authority into an inflexible model

Leisure services operate in a fast-changing environment. Demand patterns, regulatory frameworks and funding pressures continue to evolve.

Authorities should ensure that contracts are sufficiently flexible to respond to these changes, allowing for adaptation over time without requiring fundamental renegotiation and the associated procurement risks that may follow.

Similarly, if there is a change in law or HMRC policy, and the most tax efficient delivery model changes, parties will want to include provisions to handle such changes appropriately and deal with any financial and practical consequences arising from the same.

6. Failing to connect leisure with wider council priorities

Leisure services play a critical role in supporting public health, wellbeing and local economic activity.

The delivery model should therefore be considered alongside wider strategies, including health initiatives, community provision and regeneration objectives. A joined-up approach is more likely to deliver long-term value. The authority can utilise the model to have a better and greater reach into its community.

7. Overestimating internal capacity to manage the model

An agency model does not reduce the need for active client-side management – it just changes its nature.

Authorities must ensure they retain the internal expertise and governance structures required to:

Oversee contract performance
Manage risk
Make informed strategic decisions

Without this, the intended benefits of the model may not be fully realised.

8. Leaving stakeholder engagement too late

Successful leisure projects are built on strong collaboration between authorities, operators, advisors and other stakeholders.

Early engagement helps to build consensus, manage expectations and identify potential issues before they become barriers to delivery. A truly collaborative approach has been a key feature of successful procurement processes.

9. Underestimating the scale of transition and mobilisation

Transitioning to an agency model is not simply a contractual exercise. It requires detailed operational planning, including consideration of staffing, systems, branding and service continuity.

A clear and well-structured transition plan is essential to ensure that services remain stable throughout the change process.

10. Chasing savings at the expense of long-term value

While cost pressures are a significant driver, decisions should not be based solely on short-term financial savings.

The most successful models are those that deliver sustainable, high-quality services and support long-term investment in leisure infrastructure. As illustrated by major projects such as Basingstoke and Deane and Kingston, the focus should remain firmly on delivering lasting benefits for local communities.

Comment

The leisure agency model presents a compelling opportunity for local authorities seeking to modernise the way services are delivered. However, it is not a universal solution.

Each authority will need to carefully assess its own objectives, financial position and operational capacity before deciding whether the model is appropriate.

What is clear is that a considered, well-advised and strategically aligned approach is critical to success.

Want to explore whether the agency model is right for your authority?

As interest in the leisure agency model continues to grow, understanding the practical, legal and commercial implications is essential before making any decisions.

To help authorities navigate the opportunities and challenges, Blake Morgan’s leisure sector specialists will be joined by leisure specialists FMG Consulting, alongside Marie Clay, Leisure & Community Wellbeing Manager at Mansfield District Council, to host a webinar on ‘Converting Leisure Contracts to the Agency Model: Best Practice and Benefits’. This will take place on 10 September and cover the key considerations including VAT efficiencies, risk allocation, procurement implications, and lessons learned from recent projects.

You can sign up for free here. Alternatively, if you’d like to discuss how these considerations may apply to your own leisure services strategy or procurement plans, please get in touch with our specialist local government and leisure sector team.