Borough council downgraded by credit ratings company

INTERNATIONAL credit ratings company Moody’s has downgraded Warrington Borough Council because of its “risk appetite.”
But the two notch downgrade – from Aa2 to A1 – still leaves the borough with a strong credit rating, according to deputy leader of the council Russ Bowden.
He said: “It’s important that we have retained a strong credit rating as this shows that our plans to invest in Warrington for Warrington are robust.”
Moody’s have downgraded all local authorities by one notch because of councils’ continued reliance on the government.
Should there be further pressure on UK government finances, Moody’s expects that these would continue to be passed on to local authorities. Furthermore, slower economic growth would impose downward pressure on business rates, which are now partially retained by local authorities, as well as own-source revenues.
The two-notch downgrade of Warrington Borough Council reflects these same pressures on all councils but also the relative position of Warrington compared to other rated local authorities.
Moody’s state: “Warrington’s capital investment programme demonstrates a higher risk appetite relative to peers. In addition to traditional town centre infrastructure improvements, the programme includes investing in a new ‘challenger’ bank, launching a housing company and on-lending to housing associations, introducing riskier elements to the local authority’s credit profile.
“Warrington plans to fund this capital programme mainly through debt, which would lead to a projected quadrupling of debt to revenues over the next three years, from 103 per cent in 2016 to a forecast 436 per cent in 2019.”
Cllr Bowden responded: “It’s important that we have retained a strong credit rating as this shows that our plans to invest in Warrington for Warrington are robust.
“Moody’s believe that the UK government’s decision to leave the EU single market and customs union will have a negative impact on the country’s economy in the medium term. Therefore the decision to downgrade Warrington is partly a reflection of tough and uncertain economic conditions ahead.
“Moody’s recognise that some of our investments are early in their development and have yet to demonstrate their full benefits, but local residents can rest assured that all our investments are subject to comprehensive risk assessments and we act only in the best interests of Warrington.
“The money we make from our capital and treasury investments is then used to help run services. This is the only way we can plug the gap between increasing demands on our services and reduced funding from the government.
“We will continue our work to improve the local economy and make Warrington a great place in which to live, invest and do business.”
*Warrington has experienced government cuts of more than £100 million since 2010 and must save an additional £30 million by 2020.