26 councils are at risk of effective bankruptcy according to recent research

The Special Interest Group of Municipal Authorities (Sigoma) represents 47 urban authorities in the northern, midland and south-coast regions of England. The government group carried out a survey and found the below.

• 5 councils are in the process of deciding if a section 114 notice should be issued (a warning sign of insolvency!)
• 9 councils said they may have to declare bankruptcy next year
• 12 councils considered declaring bankruptcy next year

This would follow some similar collapses in recent years. Slough revealed a ”catastrophic” £100m black hole in its budget in 2021, whilst in November 2022, Croydon annouced its third bankruptcy in two years. A disastrous property investment binge by Woking’s council came to light recently too.

The threat of this number growing has been driven by the dwindling of cash reserves usually held over to plug gaps in budgets. Ultimately, authorities have ‘nothing left’. According to councils, the most common cause of these pressures was due to an increase in demand for children’s social care services.

Chairman of Sigoma, Sir Stephen Houghton, and leader of Barnsley Council, said: “The government needs to recognise the significant inflationary pressures that local authorities have had to deal with in the last 12 months. At the same time as inflationary pressure, councils are facing increasing demand for services, particularly in the care sector. Pay increases are putting substantial pressure on budgets, and so the government must ensure that local authorities have the additional funding they need to fully fund these pay increases or risk impacting future service delivery. The funding system is completely broken. Councils have worked miracles for the past 13 years, but there is nothing left.”

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