UK councils brace for spending cuts as financial crisis looms

The glitzy Victoria Square development, boasting two skyscrapers and a new Hilton Hotel, was to be a new landmark for the London commuter town of Woking. Instead, it stands as a monument to how financial bets by local councils can go badly wrong.

The hotel is yet to open its doors. Work to replace unsafe cladding on the outside of the building, which dominates the skyline of the town of 100 000 people, will only be completed this summer, almost four years after the complex’s scheduled opening was blown off track by the Covid-19 pandemic. The original budget for the development has more than quadrupled to more than £700 million (around R16.5 billion).

A combination of cuts in funding from central government, higher interest rates, Covid, and above all, soured bets on commercial real estate are set to leave Woking Borough Council with borrowings of £2.4 billion, compared with its net budget of £24 million.

It became the first of three councils last year to issue a so-called Section 114 Notice (in effect, a declaration of bankruptcy) after winning the unwanted title of England’s most indebted council relative to its population. Now it is being forced to slash spending on key services.

“The council lived beyond its means,” said Ann-Marie Barker, the Liberal Democrat leader of the council who replaced her Conservative predecessor in 2022. “We’re moving to be a smaller council.”

Source: Moneyweb