27JUL

Nottingham files its third s114 notice

2 min read

11:11UTC

Nottingham City Council issued a section 114 notice in March 2026, its third. The most-cited public tracker of such notices has not been updated since August 2024.

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EconomicDeveloping

Key takeaway

The public tally of council solvency failures is nearly two years stale, and it understates the real count.

Nottingham City Council issued a section 114 notice in March 2026, the third the authority has issued⁠¹. A section 114 notice, named after the clause of the Local Government Finance Act 1988 that requires it, is a formal declaration by a council's chief finance officer that the books will not balance. Section 114 does not make a council bankrupt, because no council can be wound up the way a company can. What it does is freeze new spending while a rescue is negotiated, which is why the running count of notices matters more than any individual one.

Anyone trying to track that count from public sources is likely to get it wrong. The Institute for Government explainer most often cited on this subject was last updated in August 2024, and still presents Nottingham's November 2023 notice as the most recent in the country⁠². Repeat that error and you understate council distress by well over a year. It is a small illustration of a general problem with this ledger: the sovereign figure is published monthly by a statistical agency, while the local government figure has to be assembled by hand from announcements, trade press and stale explainers. We will treat four or more notices in a rolling twelve months as the level that matters, and we say so before it happens rather than after.

Deep Analysis

In plain English

A section 114 notice is a legal statement from a council's own chief finance officer that it cannot balance its books, named after the section of the Local Government Finance Act 1988 that requires it. It is not the same as a company going bankrupt: the council keeps operating, but new, non-essential spending is frozen while ministers and officials work out a rescue. Unlike a business, a council cannot be liquidated or have its debts cancelled. The notice is closer to a fire alarm than a court judgment: it forces attention onto the problem without itself deciding what happens next, which is why the same council can pull it more than once.

Deep Analysis

Root Causes

A section 114 notice exists because English local authorities have no bankruptcy-equivalent regime; a council cannot be wound up or have its debts written off the way a company can. The Local Government Finance Act 1988 instead makes the notice a personal statutory duty on the chief finance officer, a mechanism designed to force honesty about an unbalanced budget rather than to fix it.

Because there is no formal insolvency process behind it, nothing structurally prevents the same council issuing a second or third notice if the underlying funding gap that caused the first was never closed, only patched.

What could happen next?

Precedent
A third notice at one council, without an accompanying escalation to commissioner-level statutory intervention, sets a precedent for how many repeat failures the current regime tolerates before forcing direct central control.

Source Landscape

This story draws on neutral-leaning sources

Primary parallel: Birmingham City Council's 2023 section 114 notice, triggered by an equal pay liability the council could not fund, led to government-appointed commissioners taking direct control of budget-setting and service cuts. The structural mechanism, a chief finance officer's statutory duty overriding political control once the books cannot balance, is the same one governing Nottingham.

Counter-parallel: Not every section 114 notice ends in full statutory intervention. Some councils have used the enforced spending freeze to renegotiate budgets internally and avoided commissioners altogether, showing the notice itself is not a predictor of eventual central takeover.

Consensus view: Local government finance lawyers treat a repeat section 114 notice at the same authority as proof the regime has no escalating consequence built in; a first notice and a third trigger the identical statutory process, a temporary spending freeze while a rescue is negotiated, regardless of how many times a council has already failed the test.

Counter-view: MHCLG's own intervention teams argue the escalation happens through statutory intervention rather than through the notice itself, pointing to commissioners appointed at other councils that took direct control of finances after repeated failures. On that reading, Nottingham's third notice without a parallel commissioner appointment (unlike Croydon or Birmingham) is itself informative about how central government is grading the severity of its underlying position.

Key tension: Whether a third notice at one council without escalation to statutory intervention shows the regime working as a proportionate, graduated response, or shows a warning system that has stopped meaning anything the second time it fires.

Sources:Room151

Mentions:Room151 →Institute for Government →Nottingham →Nottingham City Council →Birmingham City Council →

First Reported In

Update #1 · The distress moved from banks to councils

Room151· 27 Jul 2026

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Causes and effects

This Event

Nottingham files its third s114 notice

Counting section 114 notices is the standard way to measure council failure, and the count in public circulation is nearly two years out of date.

Led to

MHCLG backs 36 councils with £1.74bn

Nottingham's third section 114 notice is one instance of the local government distress reflected in the EFS count rising to 36 councils.

Occurred 22 Feb 2026

Read story →

Thirty-six councils wait, none of them confirmed

No new section 114 notice appeared in the window; Nottingham's March notice remains the most recent.

Occurred 18 Aug 2026

Read story →

Different Perspectives

Pension Protection Fund

Acting chief actuary Aaron Pang put the rise to 135.0% funded down to liabilities falling 2.1% against a 1.0% fall in assets, reflecting higher gilt yields. On Lowdown's reading, the yields that lift the Treasury's interest bill leave 4,838 company schemes with a £280.7bn surplus that does not reduce state borrowing.

Torsten Bell

The Labour figure wrote on 14 October that the IMF's October figures show the fastest fiscal consolidation in the G7. The IMF forecasts the UK deficit falling from 3.8% of GDP in 2026 to 1.4% in 2031, a squeeze still to be delivered through taxes and spending.

Tax Justice UK

The left-leaning campaign group says ten tax reforms would raise over £60bn a year for public services, and on 22 October asked why higher taxes on extreme wealth remain politically difficult. It offers the tax-led exit to the IEA's cuts; the £60bn is its own claim, not an official costing.

Institute of Economic Affairs

The free-market think tank's Alternative Budget of 19 October would suspend the state pension triple lock for three years, freeze welfare in cash terms and move tax onto a wider VAT. It claims the day-to-day budget returns to surplus in 2027-28, its own projection rather than an official costing.

Resolution Foundation

The living-standards think tank said welfare spending ran about £2.5bn above expectations in September, City AM reported on 21 October, and its economist Greg Thwaites urged targeted energy support. Its figure lands as a Chancellor who calls welfare cuts a moral duty finalises the 28 October Budget.

Institute for Fiscal Studies

Director Helen Miller said a steady-as-she-goes Budget is not an option, with the IFS putting 2029-30 headroom at about £20bn, The Independent reported on 12 October. The IFS puts the cost of avoiding cuts and funding higher defence at around £35bn of tax rises or benefit cuts, more than any headroom estimate in circulation.

Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.