Agenda item

To consider an update on the performance of YPO, of which York is one of thirteen founder members of the governing Joint Committee.

The Managing Director of YPO provided the committee with an update on the company’s performance. It was noted that YPO’s mission was to support the provision of public services, with profits maximising the dividend which could be paid back to member local authorities. YPO was in the third year of its ‘Invest for Growth’ strategy, aimed at modernisation and profitability whilst recovering from the depletion of reserves during the Covid pandemic. The company had pivoted from being a catalogue retailer to online-first, while there was considerable potential for growth on the procurement services side of the business and YPO was on target to achieve a £10m profit in 2024.

In response to questions from the committee it was confirmed that:

·        Thirty per cent of profits were ring-fenced for the thirteen founder members. As one of these, the council could expect to receive around £350,000 to £400,000 as a dividend this year.

·        With reference to ethical trading and York’s status as the UK's first UN Human Rights City, it was noted that the company’s business in Dubai consisted largely of expat teachers who were already familiar with YPO. This work had come to the company coincidently, represented a very small fraction of the overall business, and YPO did not market it.

·        The company worked closely with Wakefield Council as lead authority on apprenticeships and opportunities for care leavers, having employed several of the latter over the last four years, while conversations would take place around opportunities for armed forces leavers.

·        The largest positive financial impact in the year to date was a £1.1m increase in gross margin on stock. This followed investment on dynamic pricing software which benchmarked competitors’ prices to provide intelligence and ensure best value for public sector customers. The largest negative impact was people costs, partly due to an increase in nationally negotiated salaries.

·        In a challenging period for local authority procurement, with new regulations currently deferred until February 2025, as a central procurement function YPO was developing strategies to assist its member authorities, including a new consultancy and training function to help with capacity issues and allow authorities to reduce spending on external consultants. YPO had partnered with Go4Growth to ensure local SME supplier markets were able to fully participate in future tender and contract opportunities.

·        Discussions had also taken place between YPO, the York and North Yorkshire Combined Authority Growth Hub, the York and North Yorkshire Chamber of Commerce, and the Federation of Small Businesses.

·        Expenditure on social care was an issue across all member authorities, and while no individual authority had the ability to take on the market, a buying consortium potentially could through collaborative procurement solutions, and business case research was underway on this focusing on Children’s Placement Services and Temporary Labour Supply. It was noted that the best outcomes for children and young people involved keeping them close to their networks and were often placed out of area due to price, which was weaponised by the private sector market.

Resolved: To note the update from YPO attached as an annex to the report.

Reason:     To ensure the Council is updated on the financial performance of YPO.