Since its establishment in April 2023, Somerset Council has sold 48 commercial properties originally inherited from four former district councils, incurring a total loss exceeding £91 million. The ongoing sales are part of a strategic move to reduce debt and support front-line services amid funding challenges.
The inherited assets—ranging from retail outlets like Marks & Spencer and Wilko in Yeovil, to industrial units and business parks—were initially acquired by the former Mendip, Sedgemoor, Somerset West & Taunton, and South Somerset councils. These properties were purchased on borrowing from the Public Works Loans Board (PWLB), a government-backed lender offering lower interest rates to public sector bodies.
Encouraged by central government, Somerset Council has been gradually selling around 60% of this portfolio to avoid market undervaluation and reputational risk. Sales to date have generated over £125 million, which is approximately £8.6 million above the original valuation of these assets. Despite this apparent surplus, when factoring in the original borrowing costs and ongoing maintenance, the council has experienced a significant net loss.
A detailed report valued the entire investment portfolio at £222.4 million as of March 2024—a decline of nearly £79 million from purchase prices. Coupled with further depreciation and sale losses, the total financial shortfall stands at £91.85 million. Nevertheless, rental income generated before sales has helped offset losses, with some assets like the North Shields Retail Park delivering net profits nearing £4.4 million.
The council spokesperson highlighted that while sales have incurred losses, rental income plus sale proceeds together represent a positive return of over £17 million. However, with the government’s special allowance to use capital receipts for frontline services ending in April 2027, the council faces increased pressure to manage its debt responsibly. Current borrowing related to these investments contributes to the council’s debt surpassing £1 billion, although forecasts expect this to decrease over the coming years despite ongoing new loans for housing development.
Going forward, Somerset Council is continuing its property disposals carefully to balance financial recovery with service provision, mindful of regulatory constraints and market conditions.