London Councils has described a new report from the Local Government Information Unit (LGIU) as the latest evidence of “the severe and worsening pressures” facing borough finances.

The LGIU found that fewer than one in 10 senior council figures are confident in the sustainability of local government finance, with surging service demand causing the greatest pressure.

London Councils says boroughs in the capital will be left grappling with a funding shortfall of at least £500m in the coming year (2025-26).

Cllr Claire Holland, Chair of London Councils, said:

“This stark report chimes with what we see in the capital, where severe and worsening pressures are pushing London boroughs towards bankruptcy.

“The combination of years of structural underfunding, fast-rising demand for services, and spiralling costs have created a perfect storm for London boroughs’ finances.

“The Spending Review is a crucial opportunity to restore sustainability to council funding. This would put us in a much better position to invest in priorities such as sustaining local services, building more affordable homes, and driving the economic growth we all want to see.”

It was recently confirmed that seven London boroughs will receive Exceptional Financial Support from the government, accounting for more than a third (£418m) of the national total of £1.4bn. However, London Councils argues these emergency borrowing measures burden boroughs with further debts and will not be enough to return them to a stable financial footing.

The umbrella body is urging the government to use the Spending Review to deliver much-needed investment in local services after a prolonged period of underfunding and instability. Boroughs in the capital receive around 28% less funding per Londoner compared to 2010.

Among London Councils’ key asks is a call for overall council funding to be restored to 2010 levels by 2028-29, requiring real-terms increases of 4% every year.

The cross-party group’s priorities also include protection of funding for demand-led services to meet forecast levels of growth, access to a broader range of funding sources, and investment in the early intervention and prevention services that bring the most benefits over the long term.