Why and how was the decision taken to relocate from Churchill House?

Renting out excess space in a branded office building like Churchill House has become challenging for several reasons:

Shift to remote and hybrid working arrangements 

• The pandemic normalised remote and hybrid work arrangements, reducing the overall demand for office space as many businesses downsize their physical footprints or eliminate them altogether.
• Many organisations are now prioritising flexibility, favouring co-working spaces over longer-term commitments to conventional office setups which means the demand for space in Churchill House, as in most office spaces, is low.

Market oversupply and branded office stigma

• We are proud to have Churchill House as the recognised home of the RCoA and its Faculties, but potential tenants often perceive a ‘branded’ building as overly associated with the owners, which can in turn create concerns about a perception of being ‘secondary’ to the primary occupier. This has inhibited our ability to successfully market spare space within the building. This is exacerbated by the building’s layout, which has only one user entrance/reception area.
• Many companies have reduced their office space requirements, resulting in an oversupply of available office space in central London. This saturation intensifies competition, making it harder to attract tenants and drives the rent achieved for space down.
• Branded office spaces like ours face additional competition from modern purpose-built flexible workspaces that cater specifically to post-pandemic tenant demands.

Economic uncertainty

• Economic volatility and inflation concerns have caused companies to reconsider their expenditure on premium office spaces, opting for more cost-effective solutions. We know many companies, charities and Royal Colleges like ours who have excess space to which they have struggled to attract tenants.

Environmental and sustainability standards

• Since the pandemic, organisations are increasingly prioritising ESG (Environmental, Social, and Governance) factors, including the sustainability of office spaces. Older buildings like ours do not meet high energy-efficiency standards which means we struggle to compete against newer, greener options.
• These dynamics collectively create a tough market for renting excess space in branded office buildings, even in prime locations like ours in central London. While we have had some success and currently have the Association of Medical Research Charities (AMRC) and Epilepsy UK as tenants in Churchill House, we have not been able to attract enough interest to fill all the empty space within the building.

Churchill House currently occupies roughly double the space required for the College to deliver its core functions. Managing and maintaining excess space diverts valuable resources away from our core mission. While we have made efforts to maximise use and generate income from the surplus space, these efforts have faced significant challenges.

At the same time, the configuration of space in Churchill House means that running College exams is becoming increasingly difficult, especially as demand increases along with the need to provide reasonable adjustments for a growing number of our candidates. Again, this represents a challenge to the delivery of our core mission – we must ensure we can cater for the assessment needs of the next generation of anaesthetists.

Relocating to a building that matches our needs will help reduce running costs and provide greater long-term financial security. Occupying only the space we require will optimise cost-efficiency, resulting in significant savings on utility bills, including heating, cooling, lighting, and equipment power. Maintenance costs, such as cleaning and repairs, will also be lower in an appropriately sized space.

Furthermore, rightsizing will eliminate the need for the College to act as landlords and manage facilities for excess space, reducing administrative burdens and allowing employees to focus entirely on core business activities.

The reduced overheads from relocation will free up resources to invest in strategic priorities, such as technology, enhancing the membership experience, and expanding core services to benefit members and the public, allowing us to focus more on our charitable aims.

The marketing approach for Churchill House has concentrated on achieving an unconditional offer for the building (e.g. not subject to planning permission being granted) with a sale and leaseback arrangement that will allow the College to receive receipt of the proceeds of sale but remain in residence for 18-24 months after completion to allow time to find and relocate to a new home.

We are currently seeking input from our members about what they would value in a new College building. Early membership engagement indicates a preference for remaining in central London with good access to major transport links and physical proximity to key national stakeholders.

An employee engagement exercise is underway in parallel so we can ensure we are offering a place of work that attracts the best possible people. Preliminary searches of the market give us confidence we will be able to purchase another freehold building in central London that meets our needs and requirements, and that the timeframe of 18-24 months to relocate appears realistic.

The unconditional nature of any sale could allow us to purchase our next freehold property during the leaseback period of Churchill House and our intention is to move directly from Churchill House to our new property without the need to lease space elsewhere, if possible. A risk assessment of this plan has been conducted and mitigations are in place should we not be able to identify a suitable property within the timeframe.

The Trustees’ intention is that the total cost of the new property plus any refurbishment will be covered by the receipt from the sale of Churchill House. The regulatory compliance of any new building will be ensured as part of the relocation costs. We are not planning to take on additional borrowing through the process or ask our members for additional funds.   

The Trustees note with appreciation our former colleagues who have built such a strong College asset base in the past. We are intent on ensuring that assets continue to be protected through the purchase of a new home befitting our profession now and for the future.

Currently, the face-to-face components of all RCoA and Faculty examinations take place at Churchill House. However, expanding demand for our examinations, alongside the evolving needs of candidates, has created capacity challenges. This has led to the prioritisation of candidates, meaning some are unable to sit the exam at their preferred time.

Independent of the estates review, the examinations team has conducted an options appraisal to identify how we can best deliver high-quality examination experiences in all our future exams. This has incorporated feedback from previous candidates regarding noise and privacy issues in the current setup at Churchill House, where Gallery rooms are subdivided with boards to create examination booths.

This feedback indicates we compare unfavourably with some other Colleges who use state of the art, soundproof dedicated examination suites. Additionally, we have seen a growing number of candidates requiring reasonable adjustments, and we remain committed to supporting them with suitable examination environments.

The options appraisal concluded that certain examinations need to be held outside Churchill House because the building is a limiting factor in enabling all candidates who want to sit our exams to do so. We have already explored renting spaces in purpose-built examination centres to enhance the candidate experience while not driving up the cost of examination delivery.

For now, we are keeping our options open. It may be that some examinations are delivered in our next building, whereas others are not. The examinations team is also evaluating the feasibility of hosting examinations outside London.

The College purchased the freehold of 34 Red Lion Square (34 RLS) in 2009. The property consists of a ground and lower ground floor of approximately 1,500 sq. ft each, along with six upper floors of 700 sq. ft each. These upper floors contain six two-bedroom flats, three of which are currently let to private tenants.

34RLS is considered an investment property but has for some time been the College’s worst-performing investment due to the need for the College to invest resources into the property to maintain its income generating potential (unlike other investments), minimising the risk of voids on such a low number of accommodation units.

Despite this investment underperforming, there are still income targets set against the property. Therefore, if the property were sold and the proceeds were used to fund refurbishment at Churchill House the College would create a structural deficit. Therefore, once 34 RLS is sold the proceeds will need to be reinvested to ensure a continued and improved return on that investment.

For that reason, in December 2020, the College’s Investment Committee considered the sale of 34 RLS while recognising the need to review the entire College’s estate first. With Churchill House being marketed for sale in the Autumn of 2024, expert advice indicated that potential buyers for 34 RLS would differ from those interested in acquiring Churchill House. As a result, Trustees were advised to consider disposing of 34 RLS separately.

The disposal of 34 RLS as an investment property is part of one of the four investment themes aimed at maximising the College’s investment income, as approved by the Investment Committee in December 2022. In November 2024, both the Investment Committee and the Finance and Resources Board recommended the sale of 34 RLS to the Board of Trustees, which approved the decision in December 2024. A formal decision on the disposal of 34 RLS will be made in line with Charity Commission guidelines in early 2025.

The Trustees have given extensive consideration to Churchill House’s future over the last three years. Both external advisors commissioned to provide estate advice to the College have recommended we sell Churchill House.

The recommendation of our expert advisors to sell Churchill House was considered in depth by Council and the Board of Trustees at multiple meetings prior to Trustees’ final decision in July 2024. Feedback given by members who engaged with the College during the period of the initial Peldon Rose review in Spring 2022 was also considered.

Under charitable law it is Trustees’ responsibility to make this decision, and they did so after due consideration. The Trustees are fully aware of their legal duties, and the factors that must be considered in such decision-making and have referred to expert external and legal advice in doing this. At all times, the best interests of the College, now and into the future, have been paramount.

The Trustees acknowledge that some concerns have been raised by small numbers of members and have reflected on these at the December meetings of Council and the Board of Trustees. Following this reflection, the Trustees and Council are still in agreement that the sale of Churchill House and relocation of the College is the best option.

Trustees are aware that questions have been raised publicly about increasing staff costs as a percentage of expenditure and financial control within the College. We would like to reassure members by responding fully to those questions.

The Trustees play a critical role in overseeing the financial management and stability of the College. Trustee responsibilities are guided by charity law, the College’s Charter, Ordinances, and Regulations, and best practice in financial oversight and control. The College’s Board of Trustees consists of 12 members, nine of whom are Council members and three lay Trustees recruited for their expertise in areas relevant to our work, including finance.

The Trustees have no concerns about the financial control within the College and this position is supported by external scrutiny of the annual accounts by our appointed auditors. In addition to being published on our website, the annual accounts are presented and discussed with members at our Annual General Meeting.  

This financial scrutiny and control is informed by the current College context, including the scale and complexity of its workload, as well as changes in the NHS in recent years and the wider, very challenging financial climate.

Since 2020, staff costs have accounted for around 50% of College expenditure. The Board of Trustees has no concerns regarding our workforce composition, and we have no need or plans to consider staff cuts. If we ever did, then our employees would be the first to be informed through a comprehensive consultation process.

Using staff costs as a percentage of expenditure as the sole metric to assess financial control is neither evidence-based nor reflective of modern best practice for managing an organisation like ours. Royal Colleges and other membership organisations typically have higher staff costs because their core functions depend heavily on human resources and specialist expertise.

A long-term financial objective will always be to ensure that operational costs do not exceed income. However, securing large annual surpluses derived largely from member subscriptions is not necessarily an appropriate way to use members' money or manage a charitable organisation when reinvestment in core services for members and patients is an option. We report our reserves and reserves target in the Trustees’ annual report, in line with charity financial reporting regulations.

As the College has grown, so have its functions. For example, in recent years the College has:

• Overhauled its IT infrastructure to make it fit for purpose for our members and employees. Our digital services, such as our Lifelong Learning Platform, are used by most members regularly and for many are the most common way to interact with the College.
• Developed our communication team’s capability to provide services to our members, and engage with journalists, policymakers and the media.
• Created a policy function to influence stakeholders on our members’ behalf.
• Grown the ACSA scheme. In 2015, 30% of UK departments were engaged with ACSA. By 2024 this had increased to 79%).
• Become the home for two Faculties.
• Developed the research function with the Health Service Research Centre (now RCoA Centre for Research & Improvement), delivering research such as NELA, NAPs and the SNAPs.
• Established the Centre for Perioperative Care (CPOC), a multi-disciplinary centre, led and hosted by the RCoA.
• Been developing a fundraising team to diversify income away from membership fees.
• Increased the size of the exams team, aligned with the recommendations from an independent review.
• Supported more doctors applying through the portfolio pathway route to registration. In 2015 the College Equivalence Committee saw an average of 35 applications per year. In 2023/24 the College assessed 95 applications, and this academic year (July to November) we have already assessed 61 applications. 

Staff cost percentages measure spending but not the value or productivity generated by that investment. We believe our skilled and efficient workforce delivers excellent outcomes.

Following a recent external comprehensive pay review, we are confident our salary structure is competitive and aligns with market conditions. We have also reviewed pension costs and are assured that our current staffing structure supports our strategic and operational goals for the benefit of our members and patients. These measures have satisfied us that the College’s finances remain well-managed and under control, across all areas of expenditure, enabling us to continue delivering value to our members and to continue supporting the profession for the benefit of our patients.