4: Use of municipal bonds in Birmingham and Warrington

Municipal bonds are a common tool to finance capital spending in international cities but their use is uncommon in the UK.

Birmingham City Council’s municipal bond, known as the ‘Brummie Bond’, was launched in April 2017 to finance investment in housing in the city. Phoenix Life (based in Birmingham) agreed to lend £45 million to the council in three tranches of £15 million at an average rate of 2.3 per cent, with 18, 20 and 24 year durations. The Council claims the deal makes a saving of £1.4 million in revenue spend on interest over the life of the bond.81 The same amount from the Public Works Loan Board would be charged at 2.75 per cent.

The deal is still relatively new but it already shows importance of:

  • Beating the PWLB rate – if private borrowing can only provide borrowing at a more expensive rate than the PWLB, then the PWLB is the more attractive option
  • Providing right incentives to private investors – Phoenix Life are a pension fund looking for a steady return over a long time frame to make their asset portfolio stable

Similarly, Warrington issued a £150 million bond linked to inflation and capped at 3.8 per cent that saves £12 million in total compared to the PWLB in 2015, which was the first in over a decade.82 This allowed Warrington not just a cheaper rate than the PWLB, but it also gives the council flexibility about when it can access future tranches of financing. This was after a process of acquiring a credit rating, updating auditors, and taking the time to risk assess each offer and confirm the viability of the final bond offer.83


  • 81 Lloyds Bank Commercial Banking facilitates first £45m ‘Brummie Bond’ for Birmingham City Council accessed November 13, 2017 https://www.lloydsbank.com/assets/media/pdfs/press-releases/2017/170512-lloyds-bank-brummie-bond-press-release.pdf
  • 82 Warrington Council issues £150m bond deal accessed November 13, 2017 https://www.localgov.co.uk/Warrington-Council-issues-150m-bond-deal/39296
  • 83 Mather D, Warrington’s bond journey accessed November 13, 2017 http://www.room151.co.uk/treasury/warringtons-bond-journey/