The read in full

Every slide's text, as the read shows it. The charts are in the read itself.

What authorities are doing

Rolling short: what it saves and what it risks

How authorities are borrowing now, the intra-LA market they depend on, and how one council could weigh cost against risk.

81% of new PWLB borrowing in 2026 was for five years or less

210 authorities lending to others, down from 290 in 2019

43% of that lending comes from ten lenders

Authorities have kept their options open

In 2016, 5% of new PWLB borrowing by value was for five years or less. So far in 2026 it is 81%. With rates high and most forecasters expecting cuts, borrowing short avoids locking in today's rates for decades.

Share of new PWLB advances by value with a term of five years or less. 2026 covers January to August. Source: DMO loan-level advances.

Average term of new PWLB borrowing

34.7 years in 2016

3.4 years in 2026

EIP loans have taken a quarter of new borrowing

Equal instalment loans were 15% of new PWLB lending in 2019. In 2025 they were 27%, and 26% so far in 2026.

EIP share of new PWLB advances by value. 2026 to August. Source: DMO loan-level advances.

A 5-year EIP loan has an average life of 2.75 years. Each instalment has to be refinanced if the need for the money has not gone. EIP is shorter borrowing than its term suggests.

Authorities have used their own cash first

Using reserves and balances before borrowing is long-standing good practice, and it saves interest. In March 2022 investments were worth 45% of borrowing. By March 2026 it was 26%. The cushion is thinner now, so more of any new need is borrowed from outside.

All English authorities: investments as a share of total external borrowing. Source: MHCLG borrowing and investment live tables, to June 2026.

Investments held

£59bn in March 2022

£40bn in March 2026

The sector has been funding itself

Councils with spare cash lend it to councils that need it, keeping the money inside the public sector. Short-term loans between authorities were £1.9bn in 2010. By June 2026 they were £12.9bn.

Short-term borrowing from other local authorities, all English authorities, £bn. Source: MHCLG live tables.

For authorities that borrow from others, these loans are 10% of their debt. Most of it is repaid and borrowed again within a year.

The intra-LA market

Short-term money is cheap, except in March

Most of the year an authority borrows from another at a few basis points over SONIA. At the financial year end, when balances are lowest, the spread jumps.

Indicative spreads over SONIA in basis points. Change any month to match your own experience.

£43k extra interest on £20m borrowed for 3 months in March rather than May: 85 basis points more for the same loan.

Who lends now

The biggest lenders are combined authorities. They supplied 39% of all intra-authority lending in June 2026, up from 16% in March 2021.

West Midlands CA: £1.2bn

West Yorkshire CA: £1.0bn

South Yorkshire CA: £749m

North Yorkshire UA: £455m

Liverpool City Region CA: £413m

West of England CA: £360m

Oxfordshire: £258m

Greater Manchester CA: £250m

Wandsworth: £235m

Cambridgeshire and Peterborough CA: £196m

Ten largest lenders to other authorities, June 2026. Source: MHCLG authority-level borrowing and investment returns.

Share of intra-authority lending from combined authorities: 39%. Much of their cash is grant funding held for capital programmes.

Fewer, bigger lenders

290 authorities lent to others in March 2019. In June 2026, 210 did. The ten largest now supply 43% of the lending, up from 26%.

Authorities lending to others

Share supplied by the ten largest lenders

All English authorities, year ends to 2019 then quarterly. Source: MHCLG authority-level returns.

The pool behind the market is shrinking

Lending authorities held £42.9bn of cash in December 2021, against £28.0bn in June 2026. They now lend out 43% of it, up from 22%.

Authorities lending to others: total cash and investments, and the part lent to other authorities, £bn. The dips are March year ends. Source: MHCLG authority-level returns.

Share of lenders' cash already lent to other authorities

43% in June 2026

22% in December 2021. Less spare cash means less room to lend more when it is needed.

Who depends on it

216 authorities borrow from others. Unitary and metropolitan councils owe £9.5bn. Combined authorities lend £4.7bn and borrow £0.8bn.

Lends to others. Borrows from others

Combined authorities

Counties

Unitaries and metropolitan

London boroughs

Districts

Police, fire, other

By type of authority, June 2026. Borrowing includes loans from other authorities of more than a year. Source: MHCLG authority-level returns.

What the spread doesn't tell you

The spread tells you the price of borrowing on a normal day. It doesn't tell you how much of the money comes from a few places. Today a small number of authorities supply a large share of all lending between councils.

10% The biggest lender

25% Top three

32% Top five

43% Top ten

Share of all intra-authority lending supplied by the largest lenders, June 2026. Source: MHCLG authority-level returns.

The three largest lenders are West Midlands, West Yorkshire and South Yorkshire combined authorities. Lending surplus cash to other councils is sound treasury management, and each lender rightly decides by its own needs first. As capital programmes draw on that cash, what is available to lend will change. Planning for that sits with borrowers.

The price of certainty

What the market expects for Bank Rate

Bank Rate is 3.75%. Market pricing puts it near 4.9% a year from now. The shaded range is how far rates could plausibly move, drawn from rate changes since 2008.

Market path: Bank Rate implied by SONIA overnight index swaps on 2026-09-28. Range: 10,000 simulated SONIA paths centred on the forward curve. The same paths price every strategy in this article.

The breakeven: what fixing has to believe

Rolling 3-month money is expected to cost 5.05% a year over five years. A 5-year PWLB loan costs 5.80%. Fixing only comes out ahead if rates average about 75 basis points above what the market already expects.

How far above market expectations rates must average for fixing to pay off

5.80% vs 5.05% rolled, over 5 years

5.61% vs 4.99% rolled, over 5 years

6.18% vs 5.24% rolled, over 10 years

6.60% vs 5.54% rolled, over 20 years

PWLB certainty rates on 2026-09-28. Rolled cost: forward SONIA plus the indicative long-run 3-month spread, averaged over the same period. The rise is a parallel shift in the whole rate path.

Economists expect cuts, not rises

The market prices higher rates. Economists expect cuts. The Bank of England's survey of market participants has a median of 3.25% two years out; the market path is at 4.79%.

Bank of England Market Participants Survey, September 2026, 92 respondents. HM Treasury comparison of independent forecasts, September 2026 (to end-2027). Market: SONIA swaps on 2026-09-28.

Average Bank Rate over the next five years

4.7% market pricing

Bank survey median. If the survey is right, rolling saves even more than the breakeven slide suggests.

Why history can't settle it

Before 2022, rolling short beat a 5-year fix in at least 81% of five-year periods, so authorities that rolled were following what history rewarded. Much of that history is falling rates and a decade near zero. For periods starting since 2022, fixing has mostly been cheaper. That is why history alone cannot settle it.

86% Rolling 3-month beat a 5-year PWLB fix in 5-year windows starting before 2008

81% Rolling 3-month beat a 5-year PWLB fix in 5-year windows starting 2008 to 2021

24% Rolling 3-month beat a 5-year PWLB fix in 3-year windows starting since 2022

Line: Bank Rate to 1997, SONIA after, monthly average. Windows: every start month, costs from historical rates and the indicative spreads. Recent windows are short because five years have not passed.

Example Borough Council

Meet Example Borough Council

A borough council with a capital financing requirement of about £393.2m. It has £211.6m of PWLB loans, £70m borrowed short from other authorities, and funds the rest from its own cash.

How its £393.2m of borrowing need is funded today

PWLB, more than 10 years to run: £130m

PWLB, under 10 years to run: £81.6m

Loans from other authorities: £70m

Internal borrowing (own cash): £111.6m

£86m of capital spending to be financed by borrowing over six years

£132m to £103m reserves and working capital, falling as they are used

£6.6m PWLB interest in 2027/28, already fixed

Example Borough Council is fictional. Its figures are typical of a borough with no housing revenue account and describe no real council.

What reprices in the next year

In the next twelve months £78.3m of its £281.6m of loans falls due and needs a new rate. The largest month is March 2027.

Example Borough Council is fictional. Its figures are typical of a borough with no housing revenue account and describe no real council.

Share of its loans that reprice within a year: 28%. £28m falls due in March 2027, when intra-LA money is scarcest and dearest.

Its borrowing need

Its liability benchmark rises as the capital programme runs and reserves are used, while PWLB loans mature. The money it has to find rises from £69.3m today to £186.6m by March 2032.

Liability benchmark: capital financing requirement, less reserves and working capital, plus a £15m liquidity allowance. Example Borough Council is fictional. Its figures are typical of a borough with no housing revenue account and describe no real council.

Borrowing to find

£69.3m today

£186.6m by 2031/32. How it funds that is the decision.

Four ways to fund it

Each option funds the same need: today's intra-LA loans as they mature, plus the rise in the benchmark. The difference is how much of the rate is settled when the money is borrowed.

Keep rolling. Every loan is replaced every three months from another authority at SONIA plus that month's spread. about 3.97% now

Rate fixed when borrowed: 0%

Half and half. Half of each new need rolled short, half fixed with a PWLB 10-year loan. about 5.07% now

Rate fixed when borrowed: 50%

PWLB 5-year EIP. Borrow EIP loans as the need arises. They repay in equal half-yearly instalments. 5.61% now

Rate fixed when borrowed: 100%

Fix for 10 years. Borrow PWLB 10-year maturity loans as the need arises. 6.18% now

Rate fixed when borrowed: 100%

PWLB certainty rates and SONIA on 2026-09-28. Rolled borrowing uses the indicative long-run 3-month spreads from slide 6. Change them there and these figures follow. Surplus cash, if a fixed loan is larger than the need, earns SONIA.

Cost and bad year, in pounds

Rolling is expected to cost £10.2m less than fixing for 10 years over the next five budgets. The price is a wider range: in a 1-in-20 year, rolling interest runs £8.1m above plan, against £3.1m for fixing.

86% of the 10,000 simulated rate paths leave rolling cheaper than fixing for 10 years over 2027/28 to 2031/32.

Interest on the new money only; existing PWLB interest is the same under every option. Rolled borrowing uses the indicative long-run 3-month spreads from slide 6. Change them there and these figures follow.

If March can't be rolled

£25m of its intra-LA loans mature in March 2027. If other authorities are short of cash that month, the council pays a higher spread or turns to the PWLB. For one year the extra cost is modest. The exposure is that the squeeze comes back every March while the book keeps growing.

Roll as normal: £1.27m

3-month loans from March 2027 at the spreads from slide 6: March 95 bp, then June, September and December.

Pay up in a tight market: £1.40m

The first 3 months at a stressed spread of 300 bp, then normal rolling.

Take PWLB for a year: £1.46m

A 1-year PWLB loan at the rate the market implies for March 2027: 5.86%. In a 1-in-20 rate path, 7.17%.

£192k extra interest over the year on £25m in the worse of the two stressed routes. Borrowing that falls due outside March, or a PWLB fallback agreed in advance, avoids the squeeze.

Interest for the twelve months from March 2027. SONIA from the forward curve on 2026-09-28. The three largest lenders supply 25% of the market's lending. Example Borough Council is fictional. Its figures are typical of a borough with no housing revenue account and describe no real council.

Choosing by how much risk the budget can take

Start with the bad year the budget could absorb. Then take the cheapest mix that stays inside it.

Cheapest mix inside that limit

50% rolled

50% fixed for 10 years

£43.4m expected interest over five budgets, £5.1m less than fixing everything.

Each point is a split of the new money between 3-month intra-LA rolls and PWLB 10-year loans, run through the same 10,000 rate paths. Rolled borrowing uses the indicative long-run 3-month spreads from slide 6. Change them there and these figures follow.

Close

What to take away

Recent choices have been reasonable. The risk is shared.

Borrowing short, using your own cash first and lending to each other were each sensible decisions. The exposure comes from the whole sector making them at once: the same March, the same few lenders.

Rolling is cheaper on today's prices. For Example Borough Council, about £10.2m over five budgets against fixing for 10 years. Fixing wins only if rates average about 75 bp above market expectations.

The cost of rolling is uncertainty. In a 1-in-20 year, rolled interest runs £8.1m above plan. Fixed, £3.1m. Decide which of those the budget can carry.

The market is concentrated and seasonal. Ten lenders supply 43% of intra-LA lending, and March is when cash is scarcest. Keep maturities out of March and a fallback ready.

Choose the risk first, then the mix. Set the bad year you can absorb. The cheapest mix inside it is a decision you can explain to members and auditors.

Get this analysis for your authority

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