Treasury Management Annual Report 2025-26
Renfrewshire Council · 22 June 2026
Back to Council — 22 June 2026 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
1 PUBLIC ___________________________________________________________________ To: Council On: 22 June 2026 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Treasury Management Annual Report for 2025/26 ___________________________________________________________________ 1. Summary 1.1. It is a requirement of the Local Government Investments (Scotland) Regulations 2010 that a report outlining the treasury management activity undertaken during the year is presented to Council at the end of each financial year. 1.2. This report meets the requirements of these regulations, as well as the CIPFA Code of Practice on Treasury Management (the Code) and the CIPFA Prudential Code for Capital Finance in Local Authorities (the Prudential Code). 1.3. All aspects of the Treasury Policy Statement were complied with in 2025/26. ___________________________________________________________________ 2. Recommendations 2.1. It is recommended that the Council approves the Treasury Management Annual Report for 2025/26. _________________________________________________________ 3. Review of 2025/26 Treasury Activities 3.1 Treasury Portfolio Position at 31 March 2026 The Council's external borrowing position at the beginning and end of the most recent financial year was as follows:
Page 2
2 PUBLIC Borrowing Position as at 31 March 2025 Borrowing Position as at 31 March 2026 Change £ m (a) Average Interest Rate £ m (b) Average Interest Rate (b) - (a) Long-term Borrowings Public Work Loans Board (PWLB) Fixed Interest 237.05 3.80% 294.44 3.77% 57.39 Market Loans 46.77 4.70% 46.77 4.70% 0.00 Total Long-term 283.82 3.95% 341.21 3.90% 57.39 Short-term Borrowings Common Good Funds 4.05 4.20% 4.50 4.01% 0.45 Other Partner Bodies 29.80 4.20% 35.60 4.01% 6.31 Total Short-term 33.85 4.20% 40.10 4.01% 6.76 Total Borrowings 317.67 3.96% 381.31 3.91% 64.15 Temporary Investments 23.04 4.45% 65.42 3.73% 42.38 4. Review of Borrowing and Investment Outturn for 2025/26 4.1. Overall, the Council’s total external borrowings increased by £57.39m, all from PWLB borrowing. This additional borrowing was undertaken to maintain appropriate cash balances in support of the Capital Investment Programme. 4.2. Temporary investments held by the Council increased by £42.38m. The increase in investments is due to the new PWLB borrowing, together with grant income received (Levelling Up Fund) at the end of the financial year. 5. Review of Borrowing Strategy during 2025/26 5.1. The strategy for 2025/26 was approved by Council on 27 February 2025. Based on the Council’s planned programme of investments and interest rate forecasts for the year, the Council’s borrowing strategy was to firstly use internal cash balances to finance the Capital Investment Programme. 5.2. This strategy was prudent, as borrowing rates have continued to remain persistently high throughout the financial year. 5.3. Given the changing climate and the risks inherent in economic forecasts, a cautious approach was taken during the year regarding treasury operations. The Director of Finance and Resources monitored interest rates and adopted a pragmatic strategy based upon the following principles to manage interest rate risks:
Page 3
3 PUBLIC • if there was considered to be a significant risk of a sharp FALL in long and short-term rates, (e.g. due to a marked increase of risks around relapse into recession or of risks of deflation), then long-term borrowings would have been postponed, and potential rescheduling from fixed rate funding into short-term borrowing would have been considered. • if there was considered to be a significant risk of a much sharper RISE in long and short-term rates than initially expected, perhaps arising from an acceleration in the start date and in the rate of increase in central bank rates, an increase in world economic activity or a sudden increase in inflation risks, then the portfolio position would have been re- appraised. Fixed rate funding would have been considered whilst interest rates were lower than they were projected to be in the next few years. 6. Review of Investment Strategy and Investment Outturn for 2025/26 6.1. In carrying out investment activities, the Council will have regard to the Local Government Investment (Scotland) Regulations 2010, the accompanying Scottish Government Finance Circular 5/2010 and the CIPFA Treasury Management in the Public Services Code of Practice and Cross-Sectoral Guidance Notes (“the Treasury Management Code”). The Council’s investment priorities are: • the security of capital; and • liquidity of its investments. The Council’s investment policy was outlined in the Council’s Annual Investment Strategy Report 2025/26, which was approved by Council on 27 February 2025. This policy set out the Council’s approach for choosing investment categories and counterparties and is based on credit ratings provided by the three main credit rating agencies, supplemented by additional market data (such as rating outlooks, credit default swaps, bank share prices etc.). 6.2. The expectation for interest rates within the Treasury Management Strategy for 2025/26 was that the Bank Rate had peaked and would gradually reduce throughout the financial year. Outturn rates were broadly in line with these forecasts. It is now anticipated that the Bank Rate will remain at 3.75%, with there being little likelihood of further reductions during the 2026/27 financial year. 6.3. During 2025/26, the Council only invested with institutions listed in the Council’s approved Counterparty list and in the permitted investment
Page 4
4 PUBLIC categories. The investment activity during the year conformed to the approved strategy and the Council had no liquidity issues. 6.4. The table below shows interest rates achieved by the Council on its temporary investments during the year and, for comparison, the benchmark rate. Temporary investments - internally managed 2024/25 2025/26 Average Investment £111.27m £68.41m Actual rate of return 5.07% 4.01% Benchmark return 4.90% 4.01% 6.5. The actual rate of return was at the benchmark figure, reflecting the short- term nature of investments in 2025/26, due to lower cashflow levels. 6.6. The current Treasury Strategy remains appropriate to the Council’s ongoing financial, investment and treasury requirements, and supports the Council’s overall financial position, investment priorities and medium-term financial forecasts. While the refreshed 2026/27 strategy was recently approved on 26 February 2026, it is continually being reviewed as the economic and political landscape changes and, as the Council’s financial strategy develops, to ensure that borrowing and investments are managed to accommodate both short to medium-term treasury requirements, and also to ensure that best value is secured from longer term investment in instruments appropriate for this purpose and consistent with the Council’s risk profile. *SONIA (Sterling Overnight Index Average) is based on actual transactions and reflects the average of the interest rates that banks pay to borrow sterling overnight from other financial institutions and other institutional investors. 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% Interest Rates Temporary Investment Rates Renfrewshire Vs Comparator SONIA Renfrewshire
Page 5
5 PUBLIC 7. Debt Rescheduling 7.1. Whilst it was considered, no debt rescheduling was undertaken during the year, as the differential between PWLB new borrowing rates and premature repayment rates meant that this would not have been economical. 8. Compliance with Treasury Limits 8.1. The Prudential Code for Capital Finance in Local Authorities, which came into force on 1 April 2004, allows greater local flexibility for investment decisions that are informed and supported by a suite of performance indicators. The 2025/26 indicators were approved by Council on 27 February 2025 and an update reported to the Council on 11 December 2025. 8.2. The Council’s overall performance on these indicators provides a firm basis for the monitoring and control of capital investment and borrowing and for determining that it is affordable. Certain headline indicators are sub-divided per recommended best practice into two programmes: housing and non- housing. 8.3. The key performance indicators for Treasury are: • An Operational Boundary for the Council’s external borrowing (the upper limit for the aggregate external borrowing needed), and an Authorised Limit for the Council’s external borrowing, being the upper limit of aggregate external borrowing that is affordable and prudent; • A ratio of financing costs to net revenue stream (an affordability measure for debt repayments); and • An upper limit for fixed rate borrowing maturing within the short, medium and long-term, to ensure that the Council is not exposed to a significant re-financing requirement in the short to medium term. In addition, it is a requirement of the Council's Treasury Policy Statement that the maximum amount of long-term borrowing maturing in any one year will be no more than 15%, and the maximum amount of long-term borrowing maturing in any five-year period will be no more than 45%. The objective of these limits is to ensure that the Council is not exposed to a significant re- financing requirement over a short period when interest rates could be relatively high. 8.4. The main source of the Council’s borrowing is from the Public Works Loan Board (PWLB). The borrowing rates are based on, and are determined by, the yield on UK Government bonds (gilts). The main influences on gilt yields are Bank Rate, inflation expectations, and movements in US treasury yields.
Page 6
6 PUBLIC 8.5. Gilt yields continued to be volatile during 2025/26. At 31 March 2026 all gilt yields (1-5 years) ranged between 5.24% and 5.48%, while the 10-year and 25-year yields were 5.97% and 6.49% respectively. 8.6. For PWLB rates, the various margins for borrowing are as follows: • Standard Rate is gilt plus 100 basis points (G+100bps) • Certainty Rate is gilt plus 80 basis points (G+80bps) • Local Infrastructure Rate is gilt plus 60bps (G+60bps) • HRA Rate is gilt plus 40bps (G+40bps) 8.7. There is likely to be a gradual fall in short-dated gilt yields and PWLB rates over the next two years as the Bank Rate is forecast to gradually fall from 3.75% in March 2026 to around 3.25% in March 2028. 8.8 External Borrowing at the Year-end The Council’s aggregate external debt was contained within both the Operational Boundary and the Authorised Limit. The final outturn position compared to the prudential limits forecast at 11 December 2025 is as follows: 2024/25 Outturn 2025/26 Probable 2025/26 Outturn £m £m £m 398 Aggregate external debt at 31 March 419 598 Operational Boundary 550 624 Authorised Limit 578 8.9 Ratio of Financing Costs to Net Revenue Stream This indicator is expressed as a proportion. Both the Housing and Non- housing programme were within the limits forecast at Period 10. 2024/25 Outturn 2025/26 Probable 2025/26 Outturn % % % 2.88 Non-Housing 3.04 2.77 22.70 Housing 24.15 19.53
Page 7
7 PUBLIC 8.10 Fixed Rate Borrowing Maturing in the Short, Medium and Long-term This indicator is expressed as a proportion of the total debt of the Council. The maturity profile of the Council’s external debt is well within the approved limits. The outturn compared to the mid-year estimate is as follows: 2024/25 Outturn 2025/26 Approved Upper Limits 2025/26 Outturn % % % Short-term 1.76 Under 12 months 15 0.00 Medium term 0.00 12 months and within 24 months 15 4.40 0.00 24 months and within 5 years 45 14.36 6.52 5 years and within 10 years 50 4.95 Long-term 91.72 10 years and above 100 76.29 8.11 Long-Term Borrowing Maturity Profile During the financial year, the Council operated within the treasury limits set out in the Council’s Treasury Policy Statement and Treasury Management Strategy Statement. The Council's debt maturity profile at 31 March 2026 was within these limits. The table below shows the maturity profile of the Council’s long-term borrowing. The solid black line shows the debt maturing, and therefore requiring to be replaced, during each year up to 2072. The lighter broken line shows the debt maturing in the prospective five-year period for each year up to 2072. All years are below 40% and well within our policy limits.
Page 8
8 PUBLIC ___________________________________________________________________ Implications of the Report 1. Financial - As described in the report; the Treasury Management Strategy Statement, treasury management and prudential indicators all assist in providing assurance that the Council’s treasury management activities and longer term spending plans are affordable, prudent and sustainable. 2. HR & Organisational Development - There are no direct implications arising from the recommendations in this report. 3. Community/Council Planning Community Plan Our Renfrewshire is thriving The Council’s revenue and capital spend ensures that its facilities are fit for purpose and safe for the community, to maximise accessibility. Our Renfrewshire is well Our Renfrewshire is fair Our Renfrewshire is safe Council Plan Reshaping our place, our economy and our future The Council’s revenue and capital spend ensures that its facilities are fit for purpose and safe for the community, to maximise accessibility. Building strong, safe and resilient communities Tackling inequality, ensuring opportunities for all Creating a sustainable Renfrewshire for all to enjoy Ongoing revenue and capital budget monitoring is a tool to enable good financial management so that the Council has resources now and in the future for continued service delivery. Working together to improve outcomes 4. Legal - There are no direct implications arising from the recommendations in this report. 5. Property/Assets - There are no direct implications arising from the recommendations in this report. 6. Information Technology - There are no direct implications arising from the recommendations in this report. 7. Equality & Human Rights - There are no direct implications arising from the recommendations in this report.
Page 9
9 PUBLIC 8. Health & Safety - There are no direct implications arising from the recommendations in this report. 9. Procurement - There are no direct implications arising from the recommendations in this report. 10. Risk - The report outlines a range of measures taken during the course of 2025/26 to manage treasury risks and the risks associated with investment regulations in respect of the borrowing and investment activity of the Council, along with measures to manage these risks. 11. Privacy Impact - There are no direct implications arising from the recommendations in this report. 12. Children’s Rights - There are no direct implications arising from the recommendations in this report. 13. Climate Change - There are no direct implications arising from the recommendations in this report. 14. Cosla Policy Position - N/A _________________________________________________________ List of Background Papers: Non-Housing Capital Investment Programme, Prudential Framework and Treasury Management Strategy, and Capital Strategy 2025/26 – 2029/30, Council, 27 February 2025. Treasury Management and Prudential Indicators Mid-Year Review 2025/26, Council 11 December 2025 Non-Housing Capital Investment Programme, Prudential Framework and Treasury Management Strategy, and Capital Strategy 2026/27 – 2035/36, Council, 26 February 2026. ___________________________________________________________________ Author: Christine McCourt, Head of Finance and Procurement