Earlier this year, the National Audit Office published a report outlining the financial health of local authorities across England.
The report highlighted that although local authorities have more freedom to increase their revenue-boosting activities, they are struggling to juggle higher demands and cost pressures against significant government funding cuts of almost 50% since 2010/2011
Many local authorities are overspending on services, particularly social care which amounts to 54.4% of their total service spend. This means local authorities resort to accessing their financial reserves, which have been built up over decades. However, if local authorities continue to access these reserves, one in ten local authorities could have exhausted them within three years, according to the report.
However, you could be asking yourself – if you have no clients who are supplying local authorities, how can the reduction in their budgets possibly affect you?
The main revenue-boosting activity used by local authorities is increasing business rates. These increases will be felt in the guts of any business with the ultimate fallout meaning companies struggling to pay these increased business rates. According to a survey produced by real estate company Altus Group, out of 264 English local authorities who took part in the survey, on average, bailiffs were sent to 222 business owners every day in the first year since business rates re-valuation. In total, 67,705 instructions were made to bailiffs.
Furthermore, changes to small business rates relief has seen more owners struggle to pay bills than the previous year. Businesses in England could face a rates hike of £579m next year because the inflation measure that is used to calculate business rates is set to change.
Business rates form part of the assessment change and because bailiffs can carry away the very items that enable a business to trade – stock, computers, machinery, vehicles, removing these items can stop a company trading overnight.
Griffin James advises organisations of any size to contact recovery agents to mitigate negative financial situations as soon as they become aware of problems. We produce recovery strategies or can assist with business sales, should that become necessary.
If you are facing these issues, or other financial difficulties, get in touch to see how we can help.