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Councils face low financial impact but ‘significant operational stress’, says Moody’s
Finding accommodation for the newly homeless will add to “significant operational challenges” for councils during the coronavirus crisis but financial impacts are likely to be low, Moody’s has said.
In a statement published today, the credit rating agency said local authorities’ operations are “under extreme stress” as they tackle frontline services such as housing and social care amid staff shortages.
However, it said the credit effects “will be limited” for most councils thanks to central government support.
Town halls’ “access to liquidity remains strong”, Moody’s said, with strong cash reserves and Public Works Loan Board lending available.
Moody’s currently rates UK local authorities Aa2 negative.
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Those with retained housing stock “will face higher arrears given that unemployment has increased” but “this should only pose a short-term liquidity risk”, it said.
Council landlords “will face similar challenges to housing associations”, which Moody’s said this week would see knocks to their income offset by savings from reduced repair and development work.
District councils will also need to provide additional housing services because of “an expected increase the number of homeless”, the statement said.
Warrington Borough Council – which does not have a Housing Revenue Account – has the highest exposure to commercial income as a proportion of its spending, Moody’s said, but “a significant proportion of this income is from sources that are unlikely to be affected by the coronavirus” including interest from loans to housing associations.
Some other councils “will also face the loss of commercial income from recently acquired or developed office, leisure and retail property” with a prolonged recession potentially credit negative for them, it added.
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