Item 11 - Quarterly Treasury Management Update to 30 June 2026
West Dunbartonshire Council · 26 August 2026
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WEST DUNBARTONSHIRE COUNCIL Report by Chief Officer - Resources Council: 26 August 2026 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Subject: Quarterly Treasury Management Update to 30 June 2026 1. Purpose 1.1 This report presents updated West Dunbartonshire Council (the Council) on Treasury Management activity for the first quarter of the 2026/27 financial year from 1 April 2026 to 30 June 2026. 2. Recommendations 2.1 It is recommended Council notes the Treasury Management activity for the quarter ended 30 June 2026. 3. Background 3.1 The Council manages its treasury activities in line with the CIPFA Code ‘Treasury Management in the Public Services’. The Code requires the Council to produce reports on its Treasury Management policies, practices and activities on a regular and ongoing basis. The Council fulfils these obligations, in part, by the preparation of this Treasury Management Monitoring report produced on a quarterly basis, encompassing a review of performance. Quarterly reporting of these treasury management prudential indicators is now a recommended part of the governance framework for local authorities. 3.2 The Council’s Treasury Management Strategy 2026/2027 and Treasury and Prudential Indicators 2026/27 to 2035/36 were approved by Council at its meeting on 25 March 2026. The Treasury activity undertaken in the first quarter of 2026/27 reflects the key requirements of the Council’s 2026/27 Treasury Management Strategy. 4. Main issues 4.1 UK Economic update *Source – MUFG Treasury Management Update, Quarterly Report, 30th June 2026 • The first quarter saw the economy starting to falter with a 0.1% month of month fall in real GDP in April • Inflation is currently around 2.8% ITEM 11
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• Bank of England has left the base rate at 3.75% as the economy remains weak The economy performed well in the early stages of the energy shock, with GDP rising by a strong 0.6% quarter on quarter between January and March. But that will likely be the high point of the year. Indeed, the 0.1% month on month fall in real GDP in April was the first decline since August 2025 and brought the first signs that the economy is starting to crack. CPI inflation held steady in May at 2.8%. There wasn’t much support to inflation from energy effects. The 0.3% month on month fall in fuel prices was smaller than the 1.6% month on month drop last May and meant fuel inflation rose only a bit from 23.0% to 24.6%. After rising to 129.6%, heating oil inflation eased to 95.6%. And the 13.5% rise in the Ofgem utility price cap, which will add 0.6 percentage points (ppts) to CPI inflation, doesn’t take effect until 1st July. With food & drink inflation easing to its lowest rate since late 2024, higher energy costs do not seem to be boosting other items of the CPI just yet. There were two Monetary Policy Committee (MPC) meetings this quarter. The first, on 30th April, saw the Bank Rate stay at 3.75% with an 8-1 split vote in favour of that decision. One member dissented and voted for a 0.25% increase to 4%, citing inflation concerns, something generally noted as a primary concern within the minutes and reflecting heightened caution due to potential energy supply shocks caused by the Middle East conflict. By the time the MPC next met on 18th June, the split widened, with two members voting to raise rates to 4%. However, with headline CPI inflation sticking at 2.8%, the market’s sentiment that there may, but only may, be a need for a single rate increase over the next few months seems to be aligned to the way the MPC is thinking and is also similar to our own view of rates staying at 3.75% but with upside risk. 4.2 Interest Rate Forecast The Council’s Treasury advisors, MUFG Corporate Markets, provided the following interest rate forecast as at 25 March 2026 for Bank Rates and Public Works Loan Board (PWLB) borrowing rates. There has been no change to the rates following receipt of this forecast. Table 1: MUFG Corporate Markets Interest rate review as at 25 March 2026.
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4.3 Investments and Benchmarking Cash flow, uncertainty, and the need to maintain liquidity, has meant the Council has held most of its cash balances in Money Market Funds and with the Debt Management Office. The rate of return on Money Market Fund investments has increased during the quarter. All investment decisions are taken with reference to CIPFA’s Code of Practice on Treasury Management where security of funds is the overriding consideration, then liquidity and finally yield. As at 30 June 2026, the Council held cash balances of £36.232m, of which £1.232m was immediately available in the Council’s bank account and a further £35m immediately available from holdings in Money Market Funds and deposits held with the Debt Management Office. The Council’s investment portfolio for the first quarter of 2026/27 is shown in the following Table: Table 2: Investment portfolio at 30 June 2026 Short term investments Counterparty Total investments at start of quarter £’000 Total investments 30 June 2026 £’000 Interest rate at start of quarter % Interest rate 30 June 2026 % Type Banks Instant Access Virgin Money Bank (Main bank) 1,520 1,232 3.65 3.65 DMO 7,000 15,000 3.70 3.70 Money Market Funds Instant Access Federated 5,000 5,000 3.82 4.01 Blackrock 5,000 5,000 3.76 3.82 State Street 5,000 5,000 3.78 3.85 Abrdn 5,000 5,000 3.80 3.85 Total Investments 28,520 36,232
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Table 3: Benchmark Investment Returns 2026/27 Benchmark period Benchmark return as 30 June 2026 1 Month 3.74% 3 Months 3.75% 6 Months 3.76% 12 Months 3.95% *The rates shown above are based on the backward-looking Sterling Overnight Index. Source MUFG Executive Summary 30/06/2026 4.4 Borrowing Requirement and Debt The Council's underlying need to borrow to finance capital expenditure, termed the Capital Financing Requirement (CFR) is shown below. The 2026/27 CFR is expected to increase as a result of additions to the capital plan. Table 4: Borrowing Requirement (CFR) 2026/27 31 March 2026 Actual £’000 31 March 2027 Budget Estimate £’000 Projected as at June 2026 £’000 Total CFR 923,501 983,180 996,082 4.5 Borrowing Outturn for 2026/27 The approved Capital programmes for both the General Fund and the HRA for 2026/27 indicated additional external borrowing would need to be undertaken to finance capital expenditure within the year. During the period to 30 June 2026, the Council undertook borrowing from the Public Works Loan Board of £45m in June 2026. MUFG Corporate Markets, the Council’s treasury management advisers, provided information on the economic outlook and interest rate forecast to enable the Council to make an informed decision on borrowing. The duration of the loans was short and medium terms on the expectation of a forecast reduction in the bank rate. It is anticipated that the Council will refinance the debt as it falls due at a lower interest rate. Following the additional borrowing being undertaken, the Council remains in an under borrowed position. The Council's external borrowing position as at 30 June 2026 and expected year end position is illustrated in the undernoted table:
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Table 5: External borrowing at 2026/27 Actual March 2026 £’000 Actual June 2026 £’000 Projected March 2027 £’000 Local Authority Loans 250,500 217,500 265,500 PWLB 573,419 602,236 586,419 Market Loans 32,300 32,300 32,300 Other long-term liabilities 1,424 1,424 1,424 Long Term Liabilities - PFI 78,508 78,508 78,508 Total 936,151 931,968 964,151 The level of borrowing is forecast to increase by the end of 2026/27. This is on the basis that no new external borrowing is undertaken during the remainder of the year. 4.6 External Debt At the end of the quarter, total external debt amounted to £899.7m, a reduction of £36.4m. This was primarily due to repayment of existing local authority loans falling due for repayment, from PWLB borrowing undertaken of £45m in the current quarter. 4.7 Borrowing in Advance of Need The Council has not borrowed in advance of need in the three months ended 30 June 2026 and has no intention to borrow in advance during the remainder of 2026/27. 4.8 Debt Rescheduling Debt rescheduling opportunities have been very limited in the current economic climate, given the consequent structure of interest rates. Consequently no debt rescheduling has been undertaken to date in the current financial year. 4.9 Compliance with Prudential Limits The Operational Boundary is the limit beyond which external debt is not normally expected to exceed. In most cases, this would be a similar figure to the CFR but may be lower or higher depending on the levels of actual debt.
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The Authorised Limit for External Borrowing – This is a key prudential indicator and represents a control on the maximum level of borrowing. This represents a legal limit beyond which external debt is not allowed to exceed. Table 6 shows that actual borrowing did not exceed the target indicators for the quarter. Table 6. Target Indicators 2026/2027 £000 Actual Borrowing June 2026 £000 Operational Boundary (Exc Long Term Liability) 991,819 853,460 Authorised Limit (Exc Long Term Liability) 1,081,985 853,460 CFR 983,180 853,460 5. Resource issues While interest rates have risen over the past few years, Bank base rates are now starting to reduce. In relative terms rates remain high compared to the past decade and UK Government targets. The Council has focused on accessing short-term rather than long-term borrowing on the basis that rates are expected to fall further. The use of short- term borrowing does however have associated risks such as market rates increasing, and/or appropriate borrowing not being available when required. This approach is kept under regular review and may be changed depending on the prevailing short and long- term rates. The use of short-term borrowing does mitigate the risk of locking into long- term borrowing when rates are forecast to fall in the coming months. 6. Option Appraisal 6.1 No option appraisal was required for this report. 7. People Implications 7.1 There are no people implications. 8. Financial and Procurement Implications 8.1 There are no direct financial or procurement implications arising from this report.
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9. Risk Analysis 9.1 The main risks are as follows: (a) Capital inflation may increase capital expenditure levels, which in turn may affect the capital financing and borrowing requirement leading to an increase in borrowing, assuming no additional capital receipts are available. (b) The risk of counterparties default (i.e. loss of principal sum invested) however the Council has robust controls included within its treasury management and investment strategies that help minimise this risk. 10. Equalities Impact Assessment (EIA) 10.1 No equalities impact assessment was required in relation to this report. 11. Environmental Sustainability 11.1 No assessment of environmental sustainability was required in relation to this report. 12. Consultation 12.1 The views of Legal Services have been requested on this report who advised there are no issues or concerns. 13. Strategic Assessment 13.1 Proper budgetary control and sound financial practice are cornerstones of good governance and support Council and officers to pursue the 5 strategic priorities of the Council’s Strategic Plan. 13.2 Treasury management contributes to the Financial Strategy via the interdependency that exists between pro-active treasury management and the formulation of long-term financial plans. ______________ Laurence Slavin Chief Officer – Resources Date: 27 July 2026 Person to Contact: Lynsey Dickson, Finance Business Partner Council Offices, Church Street, Dumbarton
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E-mail: lynsey.dickson@west-dunbarton.gov.uk Background Papers: Treasury Management Strategy – Council 25 March 2026 and Audit Committee 10 June 2026 Wards Affected: All Wards