(Bloomberg) -- Nottingham City Council became the latest major casualty of Britain’s growing crisis in local government finances after being crippled by inflation and rising demand for its services.

The council declared effective bankruptcy by issuing a so-called section 114 notice on Wednesday after finding a £23 million hole in this year’s budget.

The city in the Midlands in central England is one of the largest local authorities to succumb to a myriad of financial pressures battering councils. Those include high inflation, soaring demand for social care, equal pay disputes and risky commercial investments turning sour.

The council said the notice meant that “spending that is not already contractually committed or otherwise agreed by the Section 151 Officer is immediately stopped.” 

Its financial woes follow those of Birmingham and Woking earlier this year with dozens more thought to also be on the brink. The pressures on council budgets threaten to erupt in the run-up to a general election widely expected next year. Critics have blamed the ruling Conservative Party for slashing funding to councils in real terms since taking office in 2010.

Nottingham said in a report that “a significant gap remains in the authority’s budget, due to issues affecting councils across the country, including an increased demand for children’s and adults’ social care, rising homelessness presentations and the impact of inflation. ” 

It added that “past issues relating to financial governance” were also to blame. Nottingham had previously issued a section 114 notice in late 2021.

“The situation with Nottingham City Council is more evidence that the funding model is completely broken,” said Stephen Houghton, chair of the Special Interest Group of Municipal Authorities. “Our recent survey found that 30% of our members risked issuing a Section 114 notice in the next two years. There are fundamental systemic issues with the local government finance system that have resulted in an increasing number of councils reaching breaking point.”

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