First ever Scottish council bond issue planned by Aberdeen

26 Oct 16

Aberdeen City Council is poised to become the first local authority in Scotland to raise investment finance from the capital markets.

The Labour-led council hopes to stage Scotland’s first municipal bond issue – subject to market conditions – to finance a £1bn development programme, involving redevelopment of the city’s exhibition and conference centre, new schools, transport improvements and 3,000 new homes to be built over the next 15 years.

Its plans have won strong backing in principle from the Scottish Government, which has been encouraging authorities to explore the potential of part-funding their capital programmes in the commercial marketplace.

Scottish finance secretary Derek Mackay, himself a former council leader, said: "Investment in infrastructure throughout the country is vital to Scotland's future and this bond issue has the potential to support a number of key projects in Aberdeen in the years ahead.

“It is a funding mechanism which has great potential for wider use in Scotland,” Mackay said. “These key projects planned for Aberdeen in the years ahead will be good for the city, for the north east and for Scotland as a whole.”

The plan comes two weeks after Aberdeen, one of four councils that broke away last year from the Convention of Scottish Local Authorities, became the first Scottish authority to secure a rating from a major international credit agency, Moody’s, where it was rated Aa2. Several English authorities have also gained credit ratings in recent years.

Jennifer Laing, the council’s leader, described the bond issue plan as potentially “one of the most significant events in the history of our city.

“It would be another first for a Scottish local authority and we are proud to be leading the way with innovation in public sector finance,” Laing said. “By being proactive in our approach to capital funding, we are clearly being mindful of our duty to protect the revenue budget which is the bedrock of our service delivery.”

The initiative comes as the UK Municipal Bond Agency has declared itself open for business and preparing for an issue later this year.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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