16.03.20
Lancashire County Council raises £350m through UKMBA
Lancashire County Council has raised £350m from UK Municipal Bonds Agency (UKMBA) over a five-year period at a fixed-rate deal at a rate of SONIA+80bps, which will be used to meet Lancashire’s short-term capital borrowing needs.
Sir Merrick Cockell is the Chair of the UKMBA, and spoke to PSE’s Emily Rodgers following last week’s budget about the latest UKMBA deal and the landscape of local government borrowing.
“The fact that our first bond is Lancashire, it’s the home of industrial revolution, it’s very symbolic. A lot of the questioning from potential investors or lenders was around Lancashire’s ambitions of training, housing, infrastructure, changes in demographic and skills and new set of potential lenders and investors are beginning to ask about it. The people who we’ve been seeing, this market has never existed before.”
The organisation has been providing an alternative funding option for local authorities since 2014. Stemmed from a conversation at a conference in 2012 and supported by the Local Government Association, it turned into a business plan for a new, publicly-owned agency that protects local authorities from interest rate changes by the Public Works Loan Board (PWLB) and provides a tailored alternative to competitive borrowing and bonds.
Sir Cockell spent 30 years as a councillor, and was Chair of the LGA, a key UKMBA shareholder, from 2011 to 2014, making him the ideal candidate to spearhead the agency and understand the dynamic of local authorities.
Since 2010 and the rife spread of austerity, many districts have received reduced government grants or in some cases, none at all, meaning they are increasingly having to find other ways of funding themselves.
“Broadly councils are finding it tough, you can keep saving year after year but in the end, you’ve taken out the fat and you’ve taken out the lean and you’re into the bone, every council is different but it’s a tough landscape.”
“A main part of the reason UKMBA was set up was for Local Authorities to stand on their own feet and not be dependent on the ability of PWLB to put up rates as and when it wants [as it did] by 1% last October.”
“We’re not trying to take the place of PWLB, it’s convenient, you pick up the phone say you need x million pounds and 48 hours later it’s in your account, but nobody puts all their eggs in one basket, a wise council would look at various sources…We’ve become an alternative source.”
“This is really important because with the ambitions of the North that are visible at this conference we can become a source of the market instead of the treasury absolutely engaging in a way that’s different from project finance which is more expensive, to sponsor local authorities to raise money for important things needed in the North of England. The requirements of the North of England are very live to us.”
Commenting on the recent budget and how it related to public borrowing, Sir Cockell said:
“The measures announced in the budget clearly show that the government understands the vital role local authorities have to play in providing vital initiatives – including around infrastructure and housebuilding. We look forward to continuing our work alongside councils across the UK in facilitating these projects and stand ready to offer flexible, transparent and affordable funding solutions for local government.”