Public sector taking worrying risks investing in property, warns insurer

13 Jul 18

Increased commercial activity is leaving public sector organisations exposed to the vagaries of the market, insurer Zurich Municipal has warned.

The public sector is increasingly turning to commercial activity to generate revenue with investment in commercial property being the most popular.

According to estate agent estimates cited by Zurich, around £3.8bn of public money could be exposed to the commercial property sector.

However, a survey of Association of Local Authority Risk Managers (ALARM) members found that they are worried about this trend.

A quarter (26%) of financial and risk managers said they worried that risk training was insufficient, while one in ten (12%) said they did not think their colleagues were trained to manage commercial risk at all.

Rod Penman, head of public services at Zurich Municipal said: “Public sector organisations are now the UK’s largest property owner.

“I’m sure it wasn’t the government’s intention that there should be unlimited borrowing power on commercial properties, but it is worrying to think what will happen now if the property bubble bursts?”

He called for training to be made available for those organisations pursuing a more commercial agenda so that “unacceptable risks” could be avoided.

The survey found that 59% of public sector risk and finance professionals undertake commercial activities to ensure financial stability.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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