Local authorities borrowed almost half a billion pounds from the Public Works Loan Board during September—the second largest monthly total this year.
The total of £468m was only topped by April’s £526m of borrowing. However, neither month got anywhere near the record month last year, when £1.326bn was borrowed during June 2016—the month of the Brexit referendum.
And as reported last week, there is no sign that the PWLB’s popularity is set to diminish, with Isle of Wight Council and Aylesbury Vale District Councils signing off on £200m of property acquisition strategies which will rely on the government lender.
The highest sum taken by a single authority in September was £137m by Warrington Borough Council, made up of six loans with durations of 41 to 46 years at rates between 2.31% and 2.35%.
Last month, the council completed the £200m purchase of the 123 acres Birchwood Park business park. The deal is set to reap the authority more than £10m a year in rental income. Warrington was unavailable for comment on the intentions for the money borrowed this month.
The second biggest dip into the PWLB pot this month was by Greater Manchester Waste Disposal Authority. It has borrowed £120m in three equal-sized loans of seven, 12 and 16 years’ duration.
The authority told Room151 that it would use the cash in connection with its decision in August to buy out a PFI contract with private sector partner Viridor Laing.
In a statement, it said: “Under the original PFI contract external bank loans (£263m) were taken out by Viridor Laing (Greater Manchester) Ltd to fund the project.
“Under the mutually agreed termination that came into effect on 29 September these loans have been paid back in full, allowing the authority to seek alternative borrowing at a significantly reduced rate resulting in £20m a year savings.
“The sum of these external loans is £120m, and is at a significantly reduced interest rate of circa 2% rather than 8%.”
Spelthorne Borough Council also borrowed another £48m from the PWLB in September. The council made headlines last year when it borrowed £377.5m from the PWLB to finance the purchase of the BP campus in Sunbury-on-Thames.
The council is understood to be in line for income after interest payments of around £3m a year from a 20-year lease.
Nobody from the authority returned Room151’s calls about what the new loan will be used for.
In September CIPFA chief executive DCLG permanent secretary Melanie Dawes warned that the government was preparing to tighten up the local authority investment code to cover real estate purchases.
Speaking at the Room151 FDs Summit, she said: “We are working with CIPFA to update statutory codes published by the department.”
“We are looking at extending the requirements to consider security, liquidity and yield, in that order, to all investments, and not just financial investments.”