11 February 2005
Borrowing by UK bodies is the fastest growing area of commercial debt across European local and regional government, credit experts have reported.
Standard & Poor's published a study of European local and regional government (LRG) debt on February 7.
It shows that UK authorities' commercial borrowing, which does not include debt created by the Public Works Loan Board, is expected to rise from around e11.4bn (£7.8bn) in 2004 to e14.8bn (£10.2bn) this year.
The UK's overall market share of 1.5%, however, remains low compared with that of other European states. Borrowing across the continent will top 1 trillion euros this year, with Germany accounting for 57.8% of LRG debt.
Dimitri Popov, S&P's UK market expert, told Public Finance that much of the UK's rise could be attributed to new borrowing powers for councils that came into force last April. These allow local authorities to borrow on the capital markets without consulting the government, providing they remain within affordable limits.
The Prudential code, developed by CIPFA, governs such powers.
Popov said: 'Authorities such as Transport for London have seized the opportunity to invest in infrastructure and capital projects by drawing on these powers and local councils have entered into such arrangements in a more gradual fashion.'
TfL, a functional body of the Greater London Authority, plans to borrow £3.3bn over the next five years to pay for upgrades to the capital's Underground network.
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