Coronavirus: UK towns and cities warn of potential bankruptcy due to pandemic

Liverpool and Manchester council bosses among those urging the government for help to stave off financial disaster in ‘a moment of profound crisis’

Royal Liver Building in Liverpool, where council bosses are facing a £58m budget shortfall (PA)

Some of the UK’s biggest councils have warned they could be forced to declare themselves effectively bankrupt unless the government provides emergency funding.

Leaders for Liverpool, Manchester, Leeds and Birmingham have all called on ministers to provide local authorities with more cash to stave off financial disaster due to the dire impact of the coronavirus crisis.

Several local authorities have said they may have to impose emergency spending controls known as section 114 notices – putting them into effective bankruptcy – unless they receive more money soon.

The Labour mayor of Liverpool, Joe Anderson, has written to Boris Johnson to say a “profound crisis” could be prevented if the government provides funding towards the city’s post-virus recovery plan. Liverpool is facing a shortfall of more than £58m.

Sir Richard Leese, Labour leader of Manchester City Council, also warned his administration may need to use a Section 114 order. He said the city faced a shortfall of £31m this year and £162m in the next.

Speaking to BBC Radio 4’s Today programme, Sir Richard said his council might not be able to afford to look after the most vulnerable in society if more cash was not forthcoming.

“This is more than a plea for help,” he said. “This is saying there are things the law says we have to do that we simply will not be able to do unless we get more funding. And a very substantial amount of funding.”

Councillor Philip Whitehead, Conservative leader of Wiltshire Council, echoed Sir Richard’s concerns on the same programme on Thursday morning. He said his administration had a £51m shortfall, even after accounting for money already granted by the government.

Mr Whitehead said: “So far the government has given tranches of money, we just need more of them.”

A group of 148 authorities across the UK expecting financial shortfalls have forecast a combined funding black hole of at least £3.2bn, according to a BBC report.

View of Manchester from Manchester Town Hall, where council bosses face a major funding shortfall (PA)

The broadcaster said at least five local authorities have said they would meet the criteria for issuing a section 114 notice at some point without more government funding.

Alistair Jones, associate politics professor at the Local Governance Research Centre at De Montfort University, said: “Local governments are being left to flounder. The list of near-bankrupt councils is going to grow unless more support is available.”

Facing a shortfall of just over £60m, bosses at Leeds City Council recently warned that a section 114 notice – which would halt all spending apart from statutory services such as schools and waste collection – may become necessary.

Birmingham City Council has forecast a mammoth budget shortfall of £212m – the biggest in the country, according to the BBC. A spokesperson for the council said the financial black hole was so big that even a section 114 notice “would not rectify this situation”.

Leaders at Liverpool City Council, who have previously warned of the possibility of being “declared bankrupt”, set out a £1.4bn plan to recover from the pandemic-induced slump on Thursday. They want the government to contribute £467m towards the plan.

“Liverpool, like many other cities, is in a moment of profound crisis,” the council stated in the report. “The Covid-19 pandemic has put individuals’ lives and livelihoods at risk, and threatens to derail the city's economic resurgence.”

The report proposes addressing the risk of “mass unemployment” by introducing programmes including a grant towards wage costs and a job subsidy scheme. The council which they say will create 25,600 jobs, including 12,000 construction roles.