Two weeks ago, the Birmingham City Council declared itself bankrupt and issued a section 114 notice. As local councils all over the UK struggle with the ongoing financial crisis, the government has announced emergency measures to assist Birmingham City Council in managing its financial concerns. Commissioners will oversee the effectively bankrupt authority and make direct decisions.

The council has already paid out over £1 billion in compensation to underpaid workers. A further £760 million equal pay liability has emerged, equivalent to the entire annual spending on services. There are currently no means to cover the bill, which increases by £5 million to £14 million each month. While the government is willing to provide additional financial support to the city, tough decisions including raised council tax might follow. 

Since 2020, Birmingham is the seventh council to issue a section 114 notice. Poor leadership, weak governance, mismanaged employee relations and ineffective service delivery are all to blame for Birmingham’s current financial difficulties. The council is also grappling with a projected deficit of £87 million in this year’s budget. 

Birmingham has also announced the cessation of all new spending, with the exception of essential services including education, social care, and waste collections. The council is required to prepare and agree upon an improvement plan within six months, with only five working days allotted for representations.

Financial support from the government could involve permission to borrow money or sell assets to address the financial liabilities. Despite the bankruptcy, Birmingham City council seems to be “asset-rich”. While selling some of these to cover debts has been suggested, selling cultural assets like the city museum and art gallery may not aid recovery. 

The council’s holdings encompass 26,000 acres throughout Birmingham. This makes up about 40% of the entire land area within the city’s borders. Additionally, it possesses approximately 6,500 property assets, excluding residential properties, infrastructure, and educational facilities. The total value of this property portfolio exceeds £2.4 billion, with an annual revenue generation of £32 million.

In 2015, the council sold the NEC Group, comprising the National Exhibition Centre, International Convention Centre, Utilita, and Resorts World Arena. This generated £307 million in revenue, and was part of a broader effort to finance £1 billion in equal pay claims.

Max Caller has been appointed as the lead commissioner to lead the recovery plan. He previously served as an adviser to the city. Caller has strongly emphasised the need for a collaboration between the commissioners and the council to address this issue effectively.

Councillor Robert Alden, the leader of the Conservative opposition in Birmingham, called for more transparency from the council regarding equal pay claims. He cited the failure of the Labour administration to address the issue adequately.

List of the Council’s Assets

Here’s a list of the current assets that are owned by the Birmingham City Council, that could potentially be sold to aid financial recovery: 

Birmingham Airport
Total share: 18.68%

Council Housing
Total number of houses: 59,000
Houses with health and safety issues: 23,000

Alexander Stadium
Refurbishments worth £72 million carried out in 2022

Library of Birmingham
10 level city centre library, that originally cost £189 million to build

Birmingham Museum and Art Gallery
The council owns both the building and its collections. It is temporarily closed for maintenance.

Investors keen on distressed acquisitions and rejuvenating businesses should consider seizing the current opportunity to collaborate with Birmingham’s local authorities. This will broaden the scope of their existing investment portfolios. Analysing the link between investment goals and the city’s recovery plan is key, and engaging with local advisors can be quite beneficial.