South Yorkshire Fire Service provided a £100,000 loan to set up a trading arm in late 2013 after drawing up a business plan which estimated profits of £182,660 would be delivered in the first two years of trading and a further £93,550 in the third year.
In reality, the company – branded Safety Solutions UK – recorded a loss of £22,674 in its first 16 months of trading and a loss of £30,334 in 2015/16.
The fire service has funded annual running costs of about £140,000 a year and was unable to secure their repayment from the company in 2015/16. The figure includes salary costs of £52,000 for a business development manager – an amount almost double a firefighter’s pay.
The investment in a commercial training arm, which primarily provides fire safety training, was approved by the Labour-dominated South Yorkshire Fire Authority at the same time as it was administering millions of pounds of public spending cuts.
Opposition councillors on the authority attacked the failure of the company to generate any much-needed income while the authority itself acknowledged its future was in doubt unless there was a turnaround.
Sheffield Lib Dem councillor Steve Ayris said: “South Yorkshire council taxpayers are effectively bailing out what seems to be a failing company.
“I’m deeply concerned that Safety Solutions’ accounts are not meeting their cash flow projections presented to Board Members back in February this year. What makes it worse is that the directors don’t appear to have taken the step of having the accounts audited.
“It is now time to reconsider the future role of Safety Solutions as a trading arm of South Yorkshire Fire and Rescue.”
The latest trouble to hit the beleaguered brigade comes after chief fire officers were forced to repay tens of thousands of pounds in secret overtime payments, and it was revealed contract rules designed to secure value for money had largely been ignored in deals with a roofing company worth nearly £400,000.
When the company was being set up, a fire authority report said it was hoped external funding could be secured to boost the region’s economy and provide funds which can be reinvested in South Yorkshire brigade. Instead, the company is only surviving through extending public support to cover losses.
Cynthia Ransome, a Doncaster Conservative councillor on the fire authority, said: “I have grave concerns about it.
“How does a company not make money when they have no overheads?
“They have all the advantages – no building costs, staff trained, financial backing plus the brand of the fire service and still fail to make money. I suggest they stop wasting taxpayers’ money.”
A South Yorkshire Fire Authority spokesman stressed that a loan was given to SSUK to cover its initial start-up costs and overheads, in the anticipation of future profits which may be reinvested into the service.
He added: “Like many start-up businesses, whilst the company has not made the profits anticipated in its first two years, the authority remains confident of the business’ future profitability.
“The company’s board regularly scrutinises its performance, and if the performance of SSUK continues to fall short of its initial business projections, then its future viability will be considered.”