Southampton City Council’s net borrowing is set to increase by just over £120m in the current financial year, according to a recent report.
In March 2024, the authority’s net debt stood at £330.2m, comprising both long-term and short-term borrowing. However, Southampton’s latest treasury management update revealed that by March 2025, this figure is expected to increase to £451.5m.
The report outlined that the majority of the additional borrowing is forecast to be taken out from the Public Works Loan Board (PWLB), with Southampton’s long-term debt from the body increasing from £288.6m in 2024 to £446.4m in 2025.
This comes as Southampton commenced “informal discussions” with the government last July over its combined budget shortfall of almost £150m over the medium term.
At the time, the authority also warned that a section 114 notice was still a “risk” but stated that the council was attempting to achieve a “sustainable financial footing”.
Exiting short-term borrowing
The report also indicated that Southampton plans to fully repay all of its current short-term loans, with short-term borrowing expected to be £0 by March 2025.
At present, Southampton has £24m in short-term borrowing from other local authorities.
The report noted that currently short-term borrowing is higher than 20-year maturity debt at 4.87%, with long-term debt expected to fall in the medium term.
This follows interest rates on short-term borrowing from the inter-authority lending market reaching 7% in the Spring due to a lack of liquidity.
“The primary objective when borrowing is to strike an appropriate balance between securing low interest costs and achieving cost certainty over the period for which funds are required, with flexibility to renegotiate loans should long-term plans change being a secondary objective,” the report stated.
Southampton currently has £4m remaining in Lender Option Borrowing Option loans, the report also noted, with call dates within the next 12 months.
The report explained that the forecast is subject to change, particularly due to potential adjustments to Southampton’s capital programme in response to the current financial environment.
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