The City of London Corporation is projecting a £70.2 million deficit by 2029/30, nearly £10 million higher than its previous forecast, according to its unaudited statement of accounts for the City Fund for 2025/26. The worsening financial outlook is driven by inflationary pressures, rising costs, and the government's Fair Funding reforms, which will drastically reduce the Corporation's grant from £77 million to £18 million.
Impact of Fair Funding Reforms
The Fair Funding Review aims to allocate funding to local authorities based on need, but the Corporation argues it does not account for the 680,000 daily commuters who use its services. The Corporation warned earlier this year that vital services face "uncertainty" unless a more favourable settlement is agreed. The reforms are being phased in over three years, and transitional funding will cover that period.
Other London councils are also affected. Westminster City Council faces cuts of £100 million, while Kensington and Chelsea projects a £108 million loss over four years. Hammersmith and Fulham Council expects a worst-case deficit of £40 million in 2027/28, rising to £69 million in 2028/29.
Financial Projections
The City Fund, which finances the Corporation's local authority functions, is expected to shift from a £16.4 million surplus in 2026/27 to a £20.6 million deficit in 2027/28. This deficit grows to £24.9 million in 2028/29 and then jumps to £70.2 million in 2029/30. The Corporation noted that while the deficit is not solely due to the Fair Funding reforms, the changes are a significant factor.
In its statement, the Corporation wrote: "The City Fund recognises the challenges presented by the reforms of the local government finance system through the Government’s Fair Funding Review. The Corporation supports the principle of a funding system that is transparent, evidence-based and better aligned with need, and will continue to engage constructively with Government as these reforms progress."
Housing Revenue Account Deficit
The unaudited accounts also reveal a sharp increase in the Housing Revenue Account (HRA) deficit, which reached £66.9 million in 2025/26, compared to £4.5 million in 2024/25. This reflects the costs of bringing the Corporation's housing stock up to standard. The report states: "The HRA continues to be carefully monitored both in year and over the medium term. A financing plan is being developed to ensure that a planned surplus is delivered and replenishes the reserves, pending new housing units coming on stream to bring additional rental income into the HRA."
Corporation's Response
A City of London Corporation spokesperson said: "Like many organisations, we are facing considerable demands on our resources and experiencing significant financial pressures. We have been open about these challenges and are taking responsible steps to protect our finances. This prudential and disciplined approach will ensure we can continue to deliver high-quality services for the City, London, and the UK."
The Ministry of Housing, Communities and Local Government was approached for comment but had not responded at the time of publication.
