(The following statement was released by the rating agency)
BARCELONA/PARIS/LONDON, June 13 (Fitch) Fitch Ratings has
affirmed the London
Borough of Wandsworth's (Wandsworth) Long-term foreign and local
Default Ratings (IDRs) at 'AA+' and its Short-term foreign
currency IDR at
'F1+'. The Outlooks on the Long-term IDRs are Stable.
The ratings reflect the strong institutional framework of the
Wandsworth's strong track record of focused financial
management, which includes
conservative budgeting, prudent investment policies and its low
level of debt.
However, Wandsworth also has a low operating margin and limited
raise revenue. The Stable Outlook reflects Fitch's view that its
will be stable, with debt slightly declining over time.
KEY RATING DRIVERS
Fitch considers Wandsworth as one of the financially stronger
in the UK and as a result is slightly less dependent on
Local authorities are highly dependent on central government
transfers, have no
tax-setting powers except for increasing council tax and, since
April 2013, are
entitled to a share of increase in non-domestic or business
distribution of revenue support grant and the share of business
rates top-up is
based on a specific formula, which takes into account economic
strengths of the local authorities.
Wandsworth reported a strong surplus before net financing of 11%
in the fiscal
year to March 2013. This followed an overall deficit for FY12,
affected by a buy-out of the one-off housing revenue account
Operating margin was low in FY13 at 2.6% but the operating
interest payments by 5x.
Wandsworth's budget for FY14 showed a reduction in operating
expenditure and the
operating margin is expected to have increased significantly.
The council has a
successful track record in reducing costs. Since 2010, GBP71m
has been reduced
from the general fund budget. A large part of savings over
FY14-16 will come
from reserves as well as planned budget reductions and on-going
At FYE14, Wandsworth's total debt was GBP195m, down by EUR18m
from FYE13. The
council began reducing debt in FY13 after it made use of a new
with the Public Works Loan Board (PWLB), partly funding the HRA
Debt is not expected to increase over the next four years.
Wandsworth's investment portfolio increased considerably to a
strong GBP396m at
FYE14 and can be used at any time to cover potential shortfalls.
sound cash position covered all direct debt outstanding at
FYE13. As per the
last actuarial validation, Wandsworth's pension fund obligations
Wandsworth has above-average wealth levels compared with London
averages. This should continue as population continues to grow
and given an
above-average share of high educational qualifications. The
local economy is
driven by a strong services sector with a significant number of
in public administration or commuting daily to central London,
which helps to
sustain wealth levels.
A downgrade could be triggered by a persisting negative trend in
performance, increase of debt beyond Fitch's expectations and a
consistently and sufficiently cover debt service by the
Given the limited revenue flexibility of local authorities in
the UK, the rating
is sensitive to any negative change in the central government
particularly in the context of the tight operating margin of
Continued prudent management and budgetary performance in line
with the average
over the last five years will trigger an upgrade, providing
there is also an
upgrade of the sovereign.
Fitch assumes that the council's sound liquidity and high
reserves will remain
an adequate buffer for unexpected revenue shortfalls to ensure
requirements and for future housing sector developments.
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Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530
Additional information is available on www.fitchratings.com.
Applicable criteria, 'Tax-Supported Rating Criteria', dated 14
August 2012, and
'International Local and Regional Governments Rating Criteria
States', dated 23 April 2014, are available on
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
International Local and Regional Governments Rating Criteria -
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