Business failure could put more pressure on St Helens Council !
Full details about Business failure could put more pressure on St Helens Council
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Board members were alerted to a warning about inflation that could potentially lead to increased “business failure” – which would pose “additional risks” to the board’s financial position.
The financial monitoring report, for the second period from 2022 to 23, came before the full council in its meeting on Wednesday.
Members noted the latest revised budget and projected revenue position for 2022-23, the most recent position regarding the implementation of the 2022-2023 budget savings and the 2021-22 savings that were “not fully implemented” in the year.
It also considered the impact of inflation, demand, non-delivery of savings and other matters on the budget of the Council.
They also approved the revised capital program and indicated the latest status of reserves and balances, as well as the Interim Treasury Management Strategy for the period 2022-2023.
The report stated that at this point in the year there is an expected overspend on the service of £10.795m against the current net revenue budget of £166.326m.
It says this position includes an expectation of £3.7m “in relation to the local government’s wage offer”, but adds that “company variances” would offset this by £3.099m, resulting in a net overspending variance of £7.696m.
The report states that “institutional changes” are “one-time in nature” for the period 2022-2023, and without these differences, the overall forecast situation would be “much worse and lead to a lower level of expectations for public fund balances.”
Increased business failure
urthermore, he said that “the current inflationary environment is also likely to see an increase in business failures,” which could present “additional risks” to the council’s financial position in terms of “reductions in business rate return and other income accrued via rents, service charges and service contracts.” and wider fees and charges.”
He adds: “Inflationary pressures are particularly detrimental to council finances, as unlike some other sectors, councils do not have the capacity to withstand the pressure of additional costs on local residents or businesses.
“When faced with such a hyper-inflationary environment, the Council is fully aware of the social responsibility not to expect residents, who have been facing the greatest cost-of-living pressures in decades, to pay for the basic support they need.
“The seriousness of this situation cannot be overstated and the Board’s ability to absorb the inflationary pressures detailed in this report along with the pressures from increasing demand and creating savings is very difficult.
A moratorium on non-essential expenditures and a hiring freeze remain in place, and a series of additional actions to address the projected budget situation are critical in order to reduce significant financial risks facing the Council and ensure its continued financial sustainability and resilience.