Nottingham City Council could declare bankruptcy if it cannot balance its books

The authority is facing a £23 million in-year budget overspend but has said it can meet all of its current financial obligations.

Nottingham City Council has said that it could declare bankruptcy if it cannot balance its books (Adam Peck/PA) (PA Archive)

A city council facing a £23 million in-year budget gap has said that it could declare bankruptcy if it is not feasible to balance its books.

Nottingham City Council has said that while it is “not ‘bankrupt’ or insolvent”, it will need to assess whether it can deliver a balanced budget.

It comes after concerns that the council will follow the likes of Birmingham and others in issuing a Section 114 notice, meaning a council is effectively bankrupt.

In a statement issued on Tuesday, the authority said: “The council is not ‘bankrupt’ or insolvent, the organisation has sufficient financial resources at hand to meet all of its current obligations, to pay staff, suppliers and grant recipients.

If this assessment concludes that it is not feasible for the council to balance its budget, consideration of the issuance of a report under Section 114 (3) of the Local Government Finance Act 1988 will need to be made

Nottingham City Council

“However, due to the forecasted overspend, the Council’s corporate director for finance and resources and Section 151 officer, Ross Brown, will need to consider the appropriate next steps for the authority, which will include a further assessment of the council’s ability to deliver a balanced budget in-year.

“If this assessment concludes that it is not feasible for the council to balance its budget, consideration of the issuance of a report under Section 114 (3) of the Local Government Finance Act 1988 will need to be made.”

The forecasted overspend comes following rising demand for children and adult social care services, an increase in homelessness and the impact of inflation.

While cost control measures have been implemented this year, the budget gap remains.

If a Section 114 notice is issued, all new spending would be stopped.

The council would only need to fund statutory services, although it said spending that is “already contractually committed” would be completed.

The news follows Leicester City Council’s leader, Mayor Sir Peter Soulsby, claiming in October that bankruptcy was “a real prospect” for the authority and that it could also issue a Section 114 notice before issuing its budget for 2025-26.

In September, Derbyshire County Council approved a raft of cost control measures to plug a £46 million budget gap, after previously using millions of pounds of its reserves to balance its books.

The Department for Levelling Up, Housing and Communities has been approached for comment.