The economic fallout of the pandemic has revealed the reliance of many local councils on income from commercial investments. The property speculations, which have kept services afloat in recent years, now threaten to undermine them.

Councils in England have invested £7.6bn in commercial properties since 2016. More than £3bn was poured into office developments, more than £2.3bn into retail property including shopping centres and cinemas and nearly £1bn on industrial property between 2016 and 2019 – a 14-fold increase in three years, according to the National Audit Office.

The investments were intended to create a revenue stream for cash-strapped councils, following a decade of austerity when central government grants were decimated. But with the pandemic keeping many people away from offices, shopping centres, cinemas and airports, there are fears that the income, which funds council services and the debts accrued from the investments, could start to dry up.

A Guardian analysis of council finances using data from the Institute for Fiscal Studies indicates more than 30 local authorities receive at least a quarter of their income, which they spend each year on services, from commercial investments.

Spelthorne has a debt-funded commercial property portfolio worth an estimated £1bn. The council spent £385m on a BP research centre in Sunbury-on-Thames as well as a 170,000 sq ft office building in Hammersmith, west London, and Thames Tower in Reading.

The council receives many multiples of what it needs to run council services from its property income – but the income is also needed to service its debts. By March 2019 it had borrowed £1.1bn against annual core spending power of £11m, a ratio of almost 100 to 1.

2020 has been a disastrous year for airports. Manchester has for many years had a major share in the company that owns not just its local airport but Stansted and East Midlands airports, too.

This means the council will lose out on a dividend of £71m this year, due next April – a hefty chunk of its £666m annual budget. “We continue to press government for more support for the aviation industry – including the airport – to help us get through the current crisis,” said the council leader, Sir Richard Leese.

Before Covid-19, London Luton airport, which is 100% owned by Luton borough council, was due to return £76m in dividends to the town hall over the next five years. Post-pandemic, the figure has been revised to £43.5m. The resultant hole in its budget means £17m in cuts to council services this year – cuts that would have been made years ago, the council says, without the airport income.

The council has spent more than £200m on commercial properties, investing in the Addlestone One shopping centre as well as in office buildings in and outside the borough. Most of the properties are held through special purpose vehicles to generate income to fund a regeneration plan and council services.

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