Councillors at the authority’s Companies Committee voted on Tuesday to bring the InvestSK brand in-house, with the company’s activity and annual funding transferred to the council’s Growth and Culture Directorate.
Its financial reserve will be used to fund additional pension costs incurred as a result of the move.
InvestSK was established as a private company focusing on business growth, inward investment, tourism and heritage in October 2017.
According to a report before the council, since 2018 it has received £3,338,000 in council funding – with 2019/20 seeing the highest investment of £1,368,000. Around 84% of its most recent £370,000 injection was allocated towards staffing costs.
The report said the company had “proven to be a successful body in delivering business support and has a strong brand identity”.
However, it said: “It is apparent that the current operating model is unsustainable and failing to make best use of the skillsets within the business.
“Furthermore, the lack of formal arrangements with key departments in SKDC, can lead to difficult working arrangements.”
It noted that there was a “perceived lack of accountability and scrutiny” around InvestSK and that it was “confusing to partners”.
There was also an “administrative burden” in running the company and had seen difficulties in recruitment.
The report said retaining Invest SK would increase its administrative support and reassure staff.
Councillors who opposed the company and regularly criticised its behind closed doors accounts welcomed the news and hoped other similar initiatives would follow suit.
Independent Councillor Ashley Baxter said: “It solves a number of problems of InvestSK which it has had since its foundation from my point of view.”
He said since the company’s inception, councillors had encountered secrecy and a lack of knowledge of what was going on.
“We couldn’t find out what the money was being spent on and it’s only in the last few weeks that we’ve got any detail of what the money has been spent on – a lot of that in private,” he said.
He then asked: “What’s happened to our £3.5 million since the inception of the project? What have we got to show for it?”
Councillor Phil Dilks said: “[InvestSK] was sold to us and to council taxpayers as a magic bullet to shed the shackles of local government – it was going to help make the council self sufficient.”
“If it was such a success and so brilliant, why are we told in this report that it’s unsustainable, and it’s now going to cost us to bring it back in house?”
“I’ll also welcome when we finally bring some of the other companies inhouse to overcome some of the accountability, openness and transparency problems that have been highlighted there,” he added.
Chairman of the board and council leader Conservative Councillor Kelham Cooke, said the money would have been spent whether the company existed or the service was provided by the council itself.
He said the operation remained the same, but just wouldn’t be run as a separate company.
The council has “done some fantastic things through InvestSK” including helping to hand out business grants throughout the COVID-19 pandemic, he told the committee.
“Before we had InvestSK we did not really have a successful economic development team within this council.
“We did not have the business intelligence on the ground, we didn’t know what businesses needed and we didn’t know where they needed to grow and what the pressures were,” he said.
“We now have a fantastic network of business engagement.
“We’ve got some fantastic opportunities and the team have got some fantastic networks now compared to where we were. So InvestSK for me is… critical to the future of our organisation.”
However, he acknowledged “the administrative burden of running the company is just not proportionate now to staffing levels and the budget levels”.