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Scots expecting council cutbacks while leaders say Brexit threatens exports, investment and future income

Posted: 4th July 2019

-55% of UK councils expect Brexit to impact international trade for their local businesses.

-49% say some councils will fail to deliver essential services over the next year

-78% of Scots surveyed said that they or their family had been directly impacted by council cutbacks

-64% of Scots concerned about how future cuts will impact them personally

Local councils across the UK believe Brexit will hit local exports, reduce foreign direct investment, and impact business rates, while declining central government funding may add additional pressures. That’s according to The Local State We’re In, PwC’s latest annual survey of local government.

The report, which also took the views of consumers, found that Scots are more concerned than the UK average about local authority services being reduced or closed.

The PwC report reveals that 55% of UK councils expect that local businesses in their area will experience a downturn in international trade, while almost half (45%) of councils also anticipate a decline in foreign direct investment (FDI) into their council area.

Collectively, this reduction in commercial activity will reduce anticipated income from business rates, adding further pressures to councils’ ability to maintain essential levels of service delivery.

Almost 80% of consumers in Scotland surveyed said council cutbacks had already impacted on them and their families, while two-thirds are concerned about how they will personally be impacted by future cutbacks and closures, ahead of 58% across the UK. In addition, 73% said they were concerned are how reductions in services or closures would impact their local community.

More than two-thirds (68%) of those surveyed in Scotland said they were concerned that refuse collection and recycling services would be impacted, while 67% were concerned about cuts to public transport, roads and parking. A further 63% are concerned about the impact cuts would have on street cleaning, lighting and repairs.

More than half (52%) said they were opposed to any reduction or closures in services, with just 31% accepting that cuts are necessary.

Research from the Scottish Parliament Information Centre (SPICe) published this week revealed that between 2013-14 and 2018-19, the local government revenue settlement decreased at a rate of -7.5%.

However, the SPICe report also notes that the trend reverses for 2018-19 to 2019-20, where the revenue settlement for local government increases by 1%.

Stewart Wilson, Head of Government and Public Sector in Scotland, said that given sustained pressure on council budgets, it wasn’t a surprise that the public were becoming concerned about how they and their communities would be impacted. He said:

“Austerity has been with us for 10 years while the demands on local authorities continue to rise. Expectations are increasing in parallel with constant reduction in funding, and this is providing councils across Scotland with an enormous challenge.

“They have proved their ability to deal with significant demands in the past decade, but the greatest challenges may yet be to come. That is why we believe local authorities, and their partners, will need to continue to adapt, innovate and collaborate as they look to 2020 and beyond. A structured and well-planned approach to this will be critical.”

The view across the UK

Council leaders already anticipate the ongoing impact of austerity will further erode their capacity to deliver savings and services. Just over half (53%) of councils are confident they can deliver savings in the next year without impacting on quality of service or outcomes, down from 72% last year and a high of 94% in 2012.

PwC’s ninth annual survey, The Local State We’re In, polled the views of over 100 local authority Chief Executives, Finance Directors and elected Council Leaders across the UK. The PwC survey reveals that half of local authorities expect central funding to decline post-Brexit and three-quarters (74%) have no confidence that central government will engage with cities and  local government in reshaping regional investment and regeneration funds in a post-EU landscape.

Commenting on the report, Jonathan House, PwC Health Industries and Local Government Advisory Leader, said:

“For many local government leaders, Brexit is the elephant in the council chamber.

“And, while the public focus is on Westminster and leadership politics, the most significant impact of Brexit negotiations will come at local council level, where concerns over FDI and local growth leadership may have a significant impact on provision of public services.

“Despite continued concerns over Brexit and local and government funding, councils remain focused on delivering growth, business & jobs, and health & integration and these goals  have not diminished.

“Their strategy is accurate, however delivering tangible outcomes in a world of uncertainty, austerity and financial constraints is particularly challenging.

“While councils have the desire and ambition to work collaboratively with other public services, their goals are frustrated by a continued focus on short term financial demands and the day-to-day pressures of maintaining service delivery.”

The impact of Brexit

While there is still uncertainty over the shape, timing and outcome of Brexit, half of the councils (50%) anticipate that Brexit will have an impact on the funding they receive. Nevertheless, while 43% of UK councils still say they feel prepared for potential Brexit outcomes, almost one in five (18% and up from 12% in 2018) are planning overseas trips to attract new FDI and develop trading links.

When asked which areas councils thought would be most likely to be influenced by Brexit, the top answer was the potential for a decline in international trade with businesses in their area (55%), with 45% also expecting a fall in FDI into their area. Collectively 44% of councils anticipate that the combination of reduced economic and trading activity in their region will result in falling revenue from business rates and other local taxes.

A determination to develop a proactive response to Brexit by engaging in overseas investment and trade trips suggests that councils are shifting in response to the changing trade landscape. However, when it comes to central government, three quarters (74%) say they are not confident that central government will engage with cities and local government in reshaping regional investment and regeneration funds in a post-EU landscape. 

Austerity continues to impact Local Government

The ongoing impact of austerity is evident with just half (53%) of council respondents to our survey remaining confident of delivering savings in the next year without impacting on quality of service or outcomes, down from 72% last year and a high of 94% in 2012.

However, looking beyond the next 12 months, the picture is less confident. Whereas in previous The Local State We’re In surveys the ‘cliff edge’ was always three to five years into the future, it seems it has come closer than before for many councils.

When it comes to considering the UK local government sector as a whole rather than their own council, over half (54%) of all respondents believe that some councils will get into serious financial difficulty in the next year while 49% think that some councils will fail to deliver the essential services residents require over the next year. A worrying 93% expect that some councils will face a serious financial  crisis in the next 36 months.



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