News / Politics
£400,000 of taxpayers’ money wasted in council investment in community bank
Marvin Rees has pulled the plug on ploughing any more taxpayer money into a start-up community bank feared to be “the next Bristol Energy”.
The mayor made the pledge just weeks after scrutiny councillors raised serious concerns over the business prospects for Avon Mutual.
Bristol City Council has so far invested £400,000 in the ethical bank, which is seeking a licence to launch a network of branches and free cash machines across the region, offering savings accounts and affordable loans to struggling residents and small businesses.
is needed now More than ever
Cabinet members hailed the enterprise as an “undiluted good thing” in December 2020 as they rubber-stamped the latest wave of funding of £250,000 to help Avon Mutual – which does not yet have any customers – get off the ground.
But resources scrutiny commission members who met the day before heard the business would need another £20m from various sources to become operational.
Councillors were told that because the local authority had already agreed two lots of funding, it was inevitable that the community bank would ask for a greater contribution during the third, final and by far the biggest phase of investment to begin trading.
A report to members, however, warned there was a risk the “entire financial investment could be lost” if the plan to launch the mutual failed or if it turned out not to be profitable, and that even if it was, the city council would not receive any money back until year six – 2027 or 2028.
Now, though, Bristol mayor Marvin Rees has confirmed no more cash will be given.
John Goulandris, one of the scrutiny members who expressed alarm and who has 41 years in banking, asked Rees during members’ forum how much more money he was willing to commit.
Rees replied at the remote meeting: “We are not putting any more money in. It was an enabler investment at the front end.”
Goulandris said: “That is comforting to hear.”
The £400,000 city council funding includes both investment to become a shareholder and due diligence costs.
Bristol City Council finance director Denise Murray said the only risk was that the investment so far could be lost.
She said a future decision would have to be made over the third and final round of funding when more money would be required if the council wanted to become a board member, an option Mr Rees has now rejected.
The council sunk £36.5m into Bristol Energy over five years but broke up and sold the company last year for a total of £15.3m, although the full losses are not yet known.
Adam Postans is a local democracy reporter for Bristol. Main photo: Martin Booth
Read more: Fears council is embarking on ‘the next Bristol Energy’ with investment in community bank
Our top newsletters emailed directly to you
