London councils' financial stability remains unsteady

Although London Councils network praise the £39 billion boost for affordable housing, as well as additional investment for children’s social care and temporary accommodation, it expresses concern at the small increase to council funding. London’s allocation from the £39 billion fund has yet to be announced

London boroughs are already feeling a tight squeeze, and only a small increase to their councils’ budgets could mean that financial pressures only worsen. Following more than a decade of unfolding, boroughs in 2025 are dealing with a £500 million budget shortfall this year, alongside increasing demands for services and rising costs. 

Almost a third of councils in London (seven) rely on emergency borrowing measures through the government’s Exceptional Financial Support programme, and more boroughs are facing the risk of bankruptcy should reforms fail to deliver sufficient resources. Seven London boroughs could be borrowing more than £1 million each day just to stay afloat.

London Councils stressed the importance of ensuring that the money provided to boroughs reflects the high levels of need and significant deprivation in the capital, as well as the rising cost of delivering local services. Services in particular that London Councils is looking for include deprivation measures that account for housing costs, a new formula for homelessness pressures, and accurately assessing demand for children’s services.

Councillor Claire Holland, chair of London Councils, said: “Increased investment in affordable housing is hugely welcome and critical for tackling the capital’s housing crisis. This is a potential gamechanger in our efforts to accelerate housebuilding and it’s vital that London gets its fair share of this funding.

“However, the outlook for boroughs is still extremely difficult and there remain serious risks to our financial stability. More than a decade of structural underfunding, fast-rising demand for services and spiralling costs have pushed council budgets in London to the brink.

“The upcoming reforms to local government funding are now ‘make or break’ for London boroughs. The resources we receive must match the high levels of need, deprivation and cost of delivering services in the capital.”