Triple-A Rated Birmingham
Birmingham City Council has been given a triple-A credit rating by Moody’s and an AA+ rating by Standard & Poor’s in an effort to increase its competitiveness in the markets and broaden its pool of lenders. The council has taken what has historically been seen as an unusual step for local authorities given the costs and time required to apply for a rating.
The strength of the ratings says much about the solvency of UK local authorities (or perhaps just Birmingham’s) at a time when banks across Europe are scrambling to shore up their balance sheets. And with the PWLB now offering less competitive lending rates, except in the case of borrowing for the one-off Housing Revenue Account buy-out, could this move herald greater innovation among local authorities for capital financing projects?
While a number of banks were left disappointed with the recent rethink to the PWLB lending rate for HRA financing, Birmigham’s move is likely to rekindle interest from the City in the possibility of local authority bond issuance, a source of some contention in recent months. Speaking at a fringe event in Manchester at the Conservative Party Conference recently, Chelsea & Fulham MP Greg Hands said councils “should not have borrowing powers above the use of the Public Works Loans Board.” Birmingham City Council would clearly welcome more options.