Scotland business

Aberdeen City Council in credit rating 'first'

Moody's building
Image caption Moody's has assigned Aberdeen City Council an Aa2 rating

Aberdeen City Council has announced that it has become the first local authority in Scotland to be assigned a credit rating.

The move comes as the council prepares to invest in major capital projects including the Aberdeen Exhibition and Conference Centre, school and housing developments and roads construction.

Credit rating agency Moody's has assigned Aberdeen an Aa2 rating.

That is one level below the United Kingdom as a whole.

The council said the rating would allow it to consider "innovative" new funding mechanisms, including access to debt capital markets.

In a statement, Moody's noted the authority's "strong institutional framework" as well as a "strong track record of operating performance".

It also noted Aberdeen's "wealthy local economy, albeit dependent on key industries".

However, the council's rating was given a negative outlook, mirroring the UK sovereign rating.

Credit rating agencies

  • Private-sector firms that assign credit ratings for issuers of debt
  • A credit rating takes into account the debt issuer's ability to pay back its loan
  • That in turn affects the interest rate applied to the security being issued
  • A credit downgrade can make it more expensive for a body such as a government to borrow money

Moody's wrote: "The council benefits from strong access to liquidity due to sovereign level access to capital markets for the LA (local authority) sector, facilitated by the Public Works Loan Board.

"The council has demonstrated a solid financial record for the last five years maintaining a net surplus against budget for each year."

It added: "The Aa2 rating also reflects our assessment of support from the UK government (Aa1 negative) and the very high likelihood that it would intervene in the event that ACC (Aberdeen City Council) were to face acute liquidity stress."

In January, a £250m "City Deal" was announced for Aberdeen, which will see the UK and Scottish governments jointly invest in the area.

The agreement includes funding for an energy innovation centre and the expansion of Aberdeen harbour to help the city compete for oil and gas industry decommissioning work.

Image copyright Not specified
Image caption The city council's plans include the new Aberdeen Exhibition and Conference Centre

Aberdeen City Council leader Jennifer Laing said: "Being assigned a credit rating, a first for a Scottish local authority, is a vital step forward for us as we explore options to fund what is a comprehensive capital programme designed to support the city's growth and diversification during a crucial period for Aberdeen.

"We are committed to investing in a bright and prosperous future for the people of Aberdeen and the businesses in our city, with transformation already well under way.

"Today's announcement is another significant step towards realising our ambitions."

'Demonstration of confidence'

The council's finance, policy and resources committee convener, Willie Young, said: "This process and our achievement in gaining an Aa2 credit rating serves as a very positive independent assessment of Aberdeen City Council's stability and strength.

"It is a clear demonstration of confidence in the financial management and controls we have in place, which provide us with the solid foundations we need as we build for the future."

Aberdeen City Council provides local government services to 115,000 households and 8,650 businesses, and employs about 8,600 staff.

The council's total spend is £911m, comprising £136m capital and £775m revenue expenditure.

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