Elected Member Briefing - Treasury Activity and Compliance to 30 June 2025

About this Briefing Note

Report by: Scott Walker, Chief Finance Officer

Date: 24 September 2025

Subject: Treasury Activity and Compliance to 30 June 2025

Responsible Officer: John Jennings, Senior Accountant

Details

Purpose

To update Members on the Treasury Activity and Compliance for the quarter ending 30 June 2025.

Briefing Information

Economic Background

The Bank of England's Monetary Policy Committee (MPC) reduced the UK Bank Base Rate from at 4.50% to 4.25% at its meeting on 8 May 2025. It remained at this rate over the remainder of the quarter as global uncertainty heightened and the risk of higher inflation persisted. UK inflation fluctuated over the quarter; from 3.5% for April 2025 to 3.4% for May before rising to 3.6% for June. Contributing factors to the increase in inflation was the cost of transport and food inflation. GDP growth was 0.7% in the 3 months to 31 March 2025, however figures for April and May both showed a slight reduction in growth. Based on all these figures, the expectation is for a further cut in the Bank Base rate in August to 4.0%

Internationally, Eurozone GDP growth was 0.60% in the quarter ending 31 March 2025, whilst CPI Inflation was 2% in June 2025. In the US, inflation increased over the quarter to 2.7% and GDP growth reduced. The US interest rate remained the same in June 2025 to the range of 4.25% to 4.50%.

The Public Works Loan Board's (PWLB) certainty fixed interest rates for the quarter, which are based on yields on UK gilts, are shown in the graph at Appendix I (PDF, 107 KB). There was continued volatility over the quarter due to high inflation and the global economic pressures. Shorter borrowing rates decreased by the end of the quarter, particularly for periods up to 5 years, however rates for 30 years and over either ended the period at around the same level or increased.

Treasury Activity

A summary of the Council's treasury position and transactions is shown at Appendix II (PDF, 242 KB). The main activities are detailed below. 

Whilst the Council's new borrowing requirement for 2025/26 is estimated at £175 million over the year, there was no new PWLB fixed Maturity loans undertaken over the quarter. However, there was the repayment of a fixed rate maturing 11-year PWLB loan for £5 million at a rate of 3.65%. Therefore, the Council's total long-term debt decreased from £715.2 million on 31 March 2025 at an average rate of 2.92% to £710.2 million with an average rate of 2.91% on 30 June 2025.

There were two short-term market loans borrowed in the quarter to manage the growing daily cashflow deficits. This position arose as part of the adopted strategy during the period when PWLB rates were high and were still rising, and allowed the Council to defer some of its longer-term borrowing requirement to when it was expected rates would be more favourable. Consequently, £10 million was borrowed for an average of 20 days and at an average rate of 4.48%. At the end of the quarter, there was no short-term borrowing outstanding.

Common Good and Charitable Fund balances held on fixed deposit with the Loans Fund remained the same at £2.710 million, with the average interest rate also remaining unchanged at 4.02%. Funds held from associated bodies and organisations increased from £2.752 million at the end of the previous quarter to £3 million, in line with their own cash flow requirements, whilst the average rate paid on these funds decreased from 3.82% to 3.57% reflecting the reduction in base rate in the quarter. 
        
Short term cashflow surpluses are invested in a mixture of fixed term deposits, instant access accounts and money market funds. All investments were made in accordance with the approved Investment Strategy and Permitted Investments.

Fixed Term Deposits

Cashflow surpluses which arise during the year, and which are not immediately required, are generally invested in fixed term deposits for periods of up to 12 months, or up to 3 years where forecast cashflow requirements allow. 

There were 3 fixed rate deposits made in the quarter (totalling £11.5 million) at an average interest rate of 4.57% and for an average term of 54 days. This was a significant reduction in comparison to the previous 6-month period (12 deposits totalling £63 million), with fixed deposit activity decreasing in volume and duration due, in the main, to the Council's Capital Programme expenditure requiring shorter cashflow liquidity. The fixed deposits undertaken in the quarter will generate £78,001 in interest at their maturity, a reduction from £354,667 in the previous 6-month period.

Investments for Daily Cashflow Requirements

Cashflow surpluses which are required for more immediate needs were invested in the Council's instant access and Money Market Funds. The investment transactions in the quarter can be summarised as follows:

• The daily average amount of such funds increased to £8.083 million from £6.112 million in the previous six-monthly report.
• The average interest rate achieved on these accounts over the 6 months reduced from 4.72% to 4.38%.
• Money Market Funds, which operate on instant access terms, were used extensively over the quarter. The average amount invested increased from £7.754 million in the previous 6 monthly report to £11.758 million, whilst the average interest rate reduced from 4.73% to 4.39%.
• The average amount invested via the Council's daily "Sweep" and other daily access facilities was £73,041.
• Interest generated was £172,709 on Money Market Funds activity in the quarter and £463 on the other daily access facilities activity.
• The increase in activity on the Money Market Funds reflected the need to keep an increased level of the available funds for more immediate cashflow purposes over the quarter, in line with the Capital programme.

The total amount of investments outstanding at 30 June 2025 was £6.146 million compared to £24.117 million at the end of the previous quarter. This highlights the tightness of the Council's cashflows. The overall average rate of interest on the investments outstanding decreased from 5.50% to 4.59% at the end of the current quarter.

Total income generated on investments undertaken during the quarter totals £251,173 (£744,900 in the 6-months to 31 March 2025). This measure reflects the total return on the investment activity undertaken in each period and has significantly reduced in the current quarter as a result of fewer deposits being undertaken, lower interest rates and shorter durations.

All of the above investment activities are consistent with the Council's current investment strategy and cashflow requirements.

Compliance

For the quarter ending 30 June 2025, there were no breaches in compliance with the Council's approved Treasury Management Policy Statement, Treasury Management Practices (TMP's) or lending limits as detailed in TMP 4 (Approved Instruments, Methods & Techniques).

Appendix III (PDF, 247 KB) shows the list of approved counterparties, based on the Council's current lending policy as at 29 July 2025.

For the quarter ending 30 June 2025 the average closing cleared bank balance was £25,508.45 in credit. This is within the target of less than £50,000 credit and reflects the proactive Treasury Management and cashflow monitoring.