Your City is Next: A look at Birmingham’s Fall from Grace to Bankruptcy

On paper, Birmingham should be one of the most successful cities in the UK. Boasting titles such as the ‘youngest major city in Europe’, owning the largest public library (also the 10th most visited attraction in the UK), and being governed by the biggest local authority in EU are surefire accolades of a flourishing area, right? Not exactly.

In September 2023, Birmingham City Council (BCC) issued a Section 114 notice - essentially branding itself bankrupt. Formerly the “best-governed city in the world”, Birmingham is now in the process of severing all funding to services deemed legally ‘unnecessary’. Even those seen as necessary - such as care and sanitary services - are being neglected, with social care “at risk”, and bins being left outside houses and parks for up to 16 days.

As the latest and largest local authority to join the list of bankrupt councils, the scale of Birmingham’s errors has sent shockwaves through the UK, with headlines fixating on the council’s equal pay court case and failed IT system. Yet the deeper story is more complex: Birmingham’s financial collapse is not just a tale of local mismanagement, but a cautionary example of how systemic failures, neglect, and chronic underfunding have left councils across the UK begging for more funding. 

At the heart of Birmingham’s woes lies the equal pay scandal, a financial time bomb - still ticking - caused by the council underpaying its female staff. In 2012, the Supreme Court ruled that the BCC owed reparations to women affected by their been systemic underpayment. In 2023, Birmingham had already paid £1.1 billion in settlements, yet the cost is still pertinent, with £760 million is still owed, accruing an eye-watering £14 million in interest each month. 

Critics have been quick to blame the council for failing to address the issues at hand sooner, with some even pointing fingers at women for their lack of complacently; refusing to accept lower pay than their equally skilled male counterparts. And although Birmingham does bear responsibility for its slow response, this issue in particular reflects a much larger problem. Gender pay inequality is rife across the UK’s public sector; Birmingham was simply one of the first councils forced to reckon with the consequences. 

The second contributor to Birmingham’s financial collapse was its ill-fated IT upgrade, initially budgeted at £19 million and now projected to cost over £100 million. Set to reach £215.6 million by April 2026, BCC’s upgrade to the Texas-based Oracle database management system is still causing problems for council workers. Causing both an “inherently high” risk of theft and fraud and massive loss of capital, poor oversight and unrealistic expectations of the government have been blamed. Across the UK, many councils are grappling with outdated IT systems, often facing exorbitant costs to bring them up to standard. Birmingham’s overspend may be extreme, but it underscores a broader issue: they aren’t the only ones being asked to do more with less, and the cracks are starting to reveal themselves.

The council’s financial crisis came to a head just a year after the city hosted the Commonwealth Games, a £778 million event designated a “golden decade” of opportunity. While the Games brought international attention to Birmingham, their financial legacy is murky. The £500 million athletes’ village failed to house a single competitor over the Summer due to delays in construction. They were instead housed at diverse student accommodation (ranging from £99/week at Maple Bank to £258/week at Chamberlain) offered by the University of Birmingham. With projected losses of the athlete’s village expected to cost the taxpayers over £300 million, the disconnect between high-profile civic planners and the financial realities that Birmingham citizens live out daily has never been clearer.

Birmingham’s bankruptcy has been framed by some as a local failure, but this perspective forgets the impact austerity has on councils nationwide. Since 2010, local authorities like BCC have faced a 40% reduction in funding. Birmingham’s grant from Westminster in 2021/22 was 10.2% lower than in 2009/10, despite ever increasing demand for essential services like social care. To manage their remaining - dwindling - funds, councils have been forced to cut discretionary services, from libraries, to 100% of the arts budget, to youth programmes, leaving communities struggling. In Birmingham - a city where 40% of residents are under 25 - these cuts have been particularly devastating, with youth crime rising and opportunities for young people becoming rare.

At least 10 councils have issued Section 114 notices in recent years, with surveys suggesting nearly one in five local authorities risk facing insolvency within the next year. Birmingham’s equal pay liabilities and IT overspend are headline-grabbing, but they mask a larger truth: councils are being set up to fail. The erosion of central government funding, combined with increased demand for services, has created the perfect storm.

The government’s proposed 6.5% increase in council funding for 2024/25 is a step in the right direction but falls comically short of what is needed to address the crisis. More money is required from the central government, as is a more serious approach to saving money in the long-term. Investment in preventative services like youth centres and libraries could save money in the long-term by reducing social problems that arise from neglect, e.g., crime and ill health. Cutting these services may balance the books in the short term - and present the current government’s short stint as one of success - but this is only done by neglecting future generations and councils to come.

Birmingham’s motto, Forward, now feels bitterly ironic. Viewed in the past as the hub of industrial ambition and cultural diversity, the current state of the city is a stark warning of the imminent consequences caused by neglect from Whitehall, and lack of foresight from both central and local governments.

The fall of Birmingham is not just a local tragedy - it is a national disgrace. Other councils are soon to follow, and the social and financial fabric of the UK will fray if these (previously diagnosed) concerns continue to be ignored. If we fail to act, the question will not be whether another city declares bankruptcy, but how many.