Over the last few years local authority trading companies (LATCos) have seen growing interest from councils and, because they offer an attractive blend of insourcing and outsourcing, they appeal across the political spectrum.

At the core of this popularity is the close involvement of council members and officers in the running of the company’s operations, the determination of its objectives, and the continuity of a public service ethos with a strong commitment to social value.

As local government faces ever-increasing financial pressures and uncertainty the trend away from traditional outsourcing gathers pace. A LATCo seems to offer the best of all worlds – not least in the inherent flexibility: if changes have to be made in delivery of a service (for instance responding to new waste regulations), there is no need for contract re-negotiation, with the risk of variation charges.

However, the wider benefits of a trading company – cost efficiency, greater innovation, generation of external revenue and financial returns – risk being lost if one fundamental element is missing: a commercial culture. This can be an all-too-common failing given that many local authorities have never had to develop the necessary business skills.

Norse Group has been trading since 1988, and has been able to embrace commercialism without diluting its public service ethos. This has been achieved through its exposure to the market, bidding for contracts in competition with the private sector outsourcing giants and winning contracts through competitive tendering. Last year the group submitted over 300 tenders, and won over £20 million worth of new business. It is this exposure to competition more than anything else which has defined its success.

Over 60% of Norse Group’s turnover comes from its partnerships with local authorities; a collaborative approach through a joint venture company combines the strengths of the council – local knowledge, public sector ethos, democratic accountability and experience of delivering services – with those of a commercially experienced partner: co-ordination and integration of services, developing external revenue channels, long-termism in planning and investment and effective operational cost management. If it is structured properly, a joint venture partnership can give the local authority direct control of service delivery, reduce the financial risk, and produce returns much more quickly.

Setting up a trading company, whether wholly-owned or via a strategic partnership, does not mean a dilution of those things which councils and their residents hold dear – great services, workforce protection, community values and local accountability; these attributes are essential elements of a LATCo. It is what Jonathan Werran, head of thinktank Localis, aptly termed “ethical commercialism”, and it is now widely seen as the way forward for local government.

Norse Group is the UK’s leading local authority trading company. Wholly owned by Norfolk County Council, Norse has developed an insourcing model as a radical alternative to traditional outsourcing – the joint venture partnership. The company now has LATCo partnerships with over 20 councils, providing a wide range of services including property consultancy, environmental and waste services, highways, transport and financial management.