Council issues bankruptcy threat warning after decision to scrap HS2

A council has warned it could be forced to declare bankruptcy after the government’s “devastating” decision to cancel the northern leg of HS2.

Cheshire East Council said it had spent £11m preparing for the high-speed line, including £8.6m that had been funded by borrowing.

In a report from the full council on 13 December, the local authority – which is under no overall control – said it would be required to write off the expenditure, including by expensing the £8.6m through its own revenue account.

The council said it could be forced to “trigger a [section] 114 notice” because of “insufficient funds, and inadequate reserves, to manage in-year expenditure”.

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The warning comes just weeks after Nottingham Council declared itself effectively bankrupt after issuing a section 114 notice, which means that all new spending – with the exception of protecting vulnerable people and statutory services – must stop immediately.

Birmingham City Council also issued its own 114 notice in September after being hit with a £760m bill to settle equal pay claims.

This year’s Conservative Party conference was dominated by the announcement that the northern leg of HS2 beyond Birmingham would be scrapped – prompting accusations of a betrayal of northern voters.

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Prime Minister Rishi Sunak defended his decision by promising to spend the billions of cash savings on hundreds of other transport schemes across the country instead, including a new “Network North” project to join up northern cities by rail.

But Cheshire East Council said it “does not believe that government’s alternative proposals for transport investment, Network North, are adequate to mitigate and manage the devastating impacts the cancellation of HS2 will have on the north, particularly for Cheshire East”.

The council, in the North West of England, said it was seeking to negotiate with the government to secure “an appropriate financial package to compensate for the council’s losses and recover the growth and levelling up benefits that HS2 phases 2a and 2b would have unlocked for the borough” – including nearly 4,500 homes, 5,000 new jobs and a £750m boost to the local economy.

A Department for Transport spokesperson said: “Cheshire East is set to receive significant additional support from a new £4.7bn fund to transform local transport across the north and Midlands, as well as a £110m uplift of over 11 years for local road maintenance.

“This is on top of a funding boost of more than £2.2 million for bus services in the area as well as the extension of the £2 bus fare cap to the end of 2024 – all part of our Network North plans using redirected HS2 funding to benefit more people in more places, more quickly.”

Delivery of HS2 – which was intended to link London to Birmingham and then on to Manchester and Leeds – has been a core pledge of the Conservative government, but it has been plagued by delays and ever-increasing costs.

The initial opening date of 2026 has fallen back to 2033, while cost estimates have spiralled from about £33bn in 2010 to an estimated £180bn.

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