Some 26 local authorities could issue a section 114 notice in the next two financial years, according to the Special Interest Group of Municipal Authorities (Sigoma).
A survey of the 47 local authorities the organisation represents revealed that five are currently in the process of deciding whether to issue a section 114 notice as a result of not being able to balance their annual budget in 2023-24.
A further nine councils said they might have to declare bankruptcy next year, with Sigoma stating that at least 12 other councils across the country were also considering issuing a section 114 notice in 2023/24.
Many member councils were considering issuing a section 114 notice for the first time, Sigoma noted, with a depletion of cash reserves, service demand, inflation costs and wage rises the main driving forces.
Sir Stephen Houghton, leader of Barnsley Council and Sigoma chair, said: “The government needs to recognise the significant inflationary pressures that local authorities have had to deal with in the last 12 months.
“At the same time as inflationary pressure, councils are facing increasing demand for services, particularly in the care sector.
“Pay increases are putting substantial pressure on budgets, and so the government must ensure that local authorities have the additional funding they need to fully fund these pay increases or risk impacting future service delivery.
“The funding system is completely broken. Councils have worked miracles for the past 13 years, but there is nothing left.”
Last week, Coventry City Council said it was facing the prospect of having to issue a section 114 notice and has written to central government asking for assistance.
West Berkshire Council said a section 114 notice “can’t be taken off the table” in the long term, but is taking urgent action to address a projected overspend for 2023/24.
Room151 reported in July that Bradford Council’s reserves were “close to exhaustion” as the authority had to draw down £100m in 2022/23 to balance its budget.
Earlier this month, Middlesbrough Council stated that it was at “significant risk” of exhausting its usable revenue reserves this financial year, which could lead to a potential section 114 notice being issued.
In addition, Kirklees Council recently warned that the authority could face a section 114 notice in 2024/25 if it does not reduce expenditure. This is due to Kirklees facing a £50m combined funding gap over the next two years, which if not dealt with, would reduce its reserves to below an “adequate” amount.
Other councils that have warned that they face potential s114 notices in the future include Guildford, Hastings and Southampton.
Additionally, Kent County Council’s external auditor warned last month that it faced a potential section 114 notice due to its “perilous financial position”.
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