Woking council declares bankruptcy with £2bn debt

Woking Borough Council has declared itself effectively bankrupt after buckling under £2bn of real estate debts. The council has issued a section 114 notice, acknowledging “unprecedented financial challenges”. A section 114 notice stops all but essential spending. In a statement this afternoon, the council said “the expenditure of the council is set to exceed the financial resources available, and therefore it can no longer balance its budget for the current financial year nor subsequent years”. The council currently has core funding of £16m available for the 2023/24 financial year but a deficit of £1.2bn. The council currently has debts of £1.9bn, but “as a result of the complexities of the loan facilities” this is predicted to rise to £2.4bn within the next two years. That is the equivalent of £19,000 for each of its residents. Following an investigation by ministers, the Surrey council will now be overseen by a team of expert commissioners. The debt mountain was caused by a series of debt-fuelled commercial property investments made by the previous, Conservative administration. Woking invested almost £2bn in commercial real estate between 2016 and 2019, funded by money borrowed from the Public Works Loan Board at lower-than-commercial interest rates. Its Victoria Square regeneration is currently valued at between £300m and £350m but was funded by £700m of debt. A recent government report said the council’s other investment properties had a net book value of £330m at the end of 2020/21, falling by £43m during the year. Ann-Marie Barker, Liberal Democrat leader of Woking Borough Council, said: “My administration has been very clear about the huge financial challenges facing the council due to the legacy of inherited debt. “The notice makes clear the true scale of these challenges which are so significant that the council cannot simply deal with them on its own. We must work in partnership with the whole of government and its agencies to support us in delivering a robust improvement and recovery plan. “Difficult decisions will lie ahead as we seek to balance the council’s budget and address the unaffordable debt.” To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews