The Treasury has announced that the costs of borrowing from the Public Works Loan Board will increase by 1%.
This will be a significant blow to local authorities that were taking advantage of cheaper borrowing rates to finance regeneration projects and housing delivery.
Local authorities will need to consider the impact that the rate increase will have on their relationships with wholly owned trading companies. For example, local authorities will need to ensure that any loans given to wholly owned companies are arm's length and on market terms to prevent the funding falling foul of the State aid rules. This means that the increased costs of borrowing will need to be flowed down to the company which is likely to have a significant impact on the commercial viability of projects.