Cabinet signs off £910,000 bailout to private operator that runs Doncaster's markets

The council will give £910,000 to Essex-based Market Asset Management Doncaster Ltd who only took control of markets in Doncaster and Mexborough last year.

The firm are saying 'Covid-19' pressures are the reason for the financial assistance.

Council bosses in a meeting on Tuesday said the firm told them that without the public funding, the operation would be ‘unsustainable’.

The move has caused backlash from opposition councillors including from independent group Mexborough First who were against the company taking the running of the town’s market in the first place.

Following the successful tender in 2019, MAM proposed a significant investment of £6.2m over the 25-year contract period, which included £2.3m of this to be spent in the first five years of the tenure.

At present, MAM are ‘actively seeking a new investment partner’ but council bosses say it is ‘very unlikely’ that investment is anywhere near the planned scale which will happen within the next three years.

Council bosses predict a reduction in the number of traders across both Doncaster and Mexborough markets after allocation of the government business grants and opportunities for retirement/alternative employment take up over the next uncertain year.

DMBC officers involved in the management of the markets said under council control, the local authority was losing around £580,000 a year.

Cabinet members requested to receive quarterly updates on the progress of the money handed over to the private operator.

Mexborough First Coun Sean Gibbons, said: “It is no surprise at all that the cabinet approved the decision to award MAM £910,000 as a bailout of the current agreed 25 year contract.

“Although we are fully aware and sympathetic of the significant challenges and uncertainties to trading and market management caused by Covid-19, we still do not think that the council should be trading with MAM in the first place.

“Our reasons and rationale are well documented as detailed in the ‘call-in’ in Feb 2019 when the initial 25 year deal with MAM was approved by cabinet.

“In the initial tender, MAM proposed a significant investment of £6.2m over the 25-year contract period, which included £2.3m of this to be spent in the first five years of the contract. Whilst MAM are now actively seeking a new investment partner, it is very unlikely that investment anywhere near the planned scale will happen within the next three years.

“We aim to hold Doncaster cabinet and the executive to account in order to protect the taxpayers and residents of Doncaster and Mexborough from a significant cost both financial and reputational.”

Drew Oxley, head of trading services at DMBC “MAM are retail experts specialising in markets who manage the traders to drive performance to create a busy market environment.

“As we’ve seen, the trading conditions for retail across the country have been challenging in MAM’s first year - Covid-19 has significantly added to this pressure. Retail and leisure industries have been struggling to survive and need our support.

“In March 2020, the closure of non-essential retail businesses compounded MAM’s ability to operate their business successfully and created an environment that no one could have envisaged.

“Any other third-party operator and the council would have faced the same struggles."

Doncaster Council's elected mayor Ros Jones answered public questions on the decision to hand nearly £1 million to a private firm running the borough's markets.

Essex-based Markets Asset Management Doncaster Ltd, has blamed Covid-19 and said without the funding, the operation would become 'unsustainble'.

Questions submitted to cabinet - the responses in full:

Q: Why is Doncaster Council in these difficult times, contemplating a bailout? It seems an unsteady approach to local finances. Where is the money coming from and why was this issues not previously identified as part of the council’s due diligence process?

A: The markets are an important part of the infrastructure of both Doncaster and Mexborough - if they are allowed to fail there would be a negative impact in terms of jobs, businesses and other allied retail outlets.

“Money paid to MAM will allow the markets to continue to operate. If the contract was terminated, the operation would return to the council - we ran the markets at a loss in excess of £500,000 per year. The money would have to come from contingency budgets and the aims are seen as optimistic and achievable.

“Before the pandemic, there was an upturn in the economy and the new Wool Market was oversubscribed from food and drink stores - there was lots of interest in the wider estate.”

Q: When did DMBC become aware of a potential contract variation? What impact will this have for the council to comply with its commitments to spend on local firms only?

A: “MAM came to the council and the end of the financial year (March/April 2020) and discussions have been ongoing since then.

“The money to operate the markets is focusing on jobs and services and there is not a surplus to return to the company head office.”

Q: When did DMBC carry out due diligence into MAM Doncaster? Did they look at the wider MAM group and seek discussions with officials in other councils as to their experiences working with this provider?

A: Due diligence was carried out before the contract was awarded and it was called in by councillors at a Overview & Scrutiny Committee meeting at the time.

“There were legal and financial checks on the company. In addition, there have been discussions with other councils who have MAM services.”

Q: Why is it unlikely that the investment MAM proposed will not happen? MAM promised to improve the markets by running them more efficiently and generating revenue. Why hasn’t this happened? What oversight does the council have over this matter and why aren’t we ensuring we are holding MAM to account?

A: “Capital investment from the parent company is unlikely to happen in the current climate as the retail, food and beverage industry in the UK hit.

“The country is in the worst recession since World War II which has significantly impacted the private sector to make investment decisions.

“Most of the market has been closed, income from the concessions and the percentage of turnover is the most lucrative area of the market and this has not been forthcoming.

“In addition, vacant market stalls have not been taken up and the company has only seen interest from new traders across Doncaster and Mexborough.

“Without financial support, MAM could become insolvent and the service would have to return to the council and outstanding costs would still have to be met by DMBC. There is also a lack of expertise in running markets within the council.

“With this new oversight and a closer working relationship with MAM, the monthly trading and financial position of the company will be monitored and business cases to improve the market will be approved by the council.”