3.0 TREASURY MANAGEMENT

Overview

3.1 This section of the report presents details of the Council’s Treasury Management Activity during Q2 2025/26, changes to the Approved Lending List and other current policy issues and considerations.

3.2 Treasury Management in Local Government is governed by the CIPFA Code of Practice on Treasury Management in the Public Services and in this context is the management of the Council’s borrowing, cash flows, its banking and capital market transactions, the effective control of the risks associated with those activities and the pursuit of optimum performance consistent with those risks. The Council has adopted the Code and complies with its requirements.

3.3 The CIPFA Code of Practice for Treasury Management recommends that Members should be informed of Treasury Management activities at least twice a year but preferably quarterly. This report ensures, therefore, that the Council is adopting Best Practice in accordance with CIPFA’s Code of Practice.

Economic Update

3.4 The Council’s treasury advisors, MUFG Corporate Markets (formally Link Group), summarised the key points associated with economic activity in Q2 2025/26 up to 30- September 2025:

• A 0.3% pick up in GDP for the period April to June 2025. More recently, the economy flatlined in July, with higher taxes for businesses restraining growth;

• The 3m/yy rate of average earnings growth excluding bonuses has fallen from 5.5% to 4.8% in July;

• CPI inflation has ebbed and flowed but finished September at 3.8%, whilst core inflation eased to 3.6%;

• The Bank of England cut interest rates from 4.50% to 4.25% in May, and then to 4% in August;

• The 10-year gilt yield fluctuated between 4.4% and 4.8%, ending the half year at 4.70%

A more detailed economic commentary on developments during Q2 2025/26 is included in Appendix E.

Interest Rate Forecasts

3.5 The current interest rate forecasts (11 August 2025) of MUFG Corporate Markets are as follows

* PWLB Rates are shown net of certainty rate 0.2% discount

• Money market yield forecasts are based on expected average earnings by local authorities for 3 to 12 months.

• The MUFG Corporate Markets forecast for average earnings are averages i.e., rates offered by individual banks may differ significantly from these averages, reflecting their different needs for borrowing short-term cash at any one point in time.

The forecast has proved robust over the period since August, setting out a central view that short and long-dated interest rates will start to fall once it is evident that the Bank of England has been successful in squeezing excess inflation out of the economy, despite a backdrop of stubborn inflationary factors. Nonetheless, the longer dated part of the forecast also reflects the increased level of Government borrowing over the term of the current Parliament and the weakness in the public finances.

Annual Investment Strategy

3.6 The Treasury Management Strategy Statement (TMSS) for 2025/26, which includes the Annual Investment Strategy, was approved by the Council on 14 February 2025. It sets out the Council’s investment priorities as being:

• Security of capital;

• Liquidity; and

• Yield.

3.7 The Council will aim to achieve the optimum return (yield) on its investments commensurate with proper levels of security and liquidity. In the current economic climate it is considered appropriate to keep investments short term to cover cash flow needs, but also to seek out value available in periods up to 12 months with high credit rated financial institutions, using our suggested creditworthiness approach, including a minimum sovereign credit rating and Credit Default Swap (CDS) overlay information.

3.8 The investment activity up to Q2 2025/26 was as follows:

• Balance invested at 30 September 2025: £710.75m

• Average Daily Balance 2025/26 up to 30 September 2025: £758.6m

• Average Interest Rate Achieved up to 30 September 2025: 4.44%

These funds were available on a temporary basis and the level of funds available was mainly dependent on the timing of revenue receipts, receipt of grant and progress on the capital programme.

3.10 The average return to Q2 2025/26 compares with the backward looking SONIA rates as follows:

• 4.19% 7 day

• 4.16% 1 month

• 4.10% 3 months

• 4.01% 6 months

• 3.88% 12 months

3.11 It is also a key requirement of the CIPFA Code of Practice that annual Treasury Management Strategies should be kept under constant review throughout the year and reported to Members as appropriate. Although there continues to be uncertainty in the financial and banking market, both globally and in the UK, it is considered that the Strategy approved in February 2025 is still fit for purpose in the current economic climate.

Approved Lending List

3.12 The Approved Lending List as at 30 September 2025 is attached as Appendix B with changes made during Q2 2025/26 being reported in Appendix C.

Debt and borrowing

3.13 The Council’s external debt outstanding at 30 September 2025 and forecast position for 2025/26 is as follows:-

Detail	PWLB		Money Market Loans	Total
Detail	£m	%	£m %	£m	%
At 31 March 2025	352.1	3.74	15.0 4.03	367.1	3.75
Loan Repayments	0.1		0.0	0.1
New Loans Taken	0.0		0.0	0.0
= Loans Outstanding at 30 September 2025	352.0	3.74	15.0 4.03	367.0	3.75
Further Scheduled In Year Repayments	11.6		5.0	16.6
Forecast Additional Loans to be Taken	0.0		0.0	0.0
= Estimated Loans Outstanding at 31 March 2026	340.4 3.73		10.0 4.15	350.4 3.74

3.14 Any change to the forecast debt outstanding by the end of 2025/26 will be largely determined by whether the borrowing requirement for 2025/26 is ultimately financed by external borrowing or internal borrowing.

3.15 Based on the Q2 Capital Plan update the total external borrowing requirement for 2025/26 is currently forecast to be:-

Detail	£m

2025/26 Borrowing Requirement Borrowing
Capital Plan Borrowing Requirement Adjustment for Company Loans Revenue Provision for General Fund Debt Repayment (MRP) Revenue Provision for HRA Debt Repayment (MRP) External Borrowing Loan Repayments	8.9 4.5 -14.7 -1.2 -16.6
= Total 2025/26 Borrowing Requirement	-19.1

3.16 A value for money assessment would therefore indicate that value could be best obtained by avoiding/delaying new borrowing and continuing to use internal cash balances to finance new capital expenditure or to replace maturing external debt. This would maximise short term revenue savings and produce other benefits, but is not risk free.

3.17 This Internal capital financing option will therefore continue to be actively adopted on an ongoing basis in order to achieve short term revenue savings and mitigate the credit risk incurred by holding investments in the market.

3.18 New external borrowing rates (fixed interest maturity rates from the PWLB reflecting

the 0.2% ‘certainty discounts’) during Q2 2025/26 were as follows:-

3.19 In September 2025, upon receipt of a proposed notification to increase the Interest Charge on one of the Council’s £5m Market Loans, a decision was taken by the Assistant Director of Resources, to repay this Loan, following advice from the Council’s Treasury Advisors. Further opportunities for Debt Restructuring will also continue to be closely monitored.

Treasury and Prudential Indicators

3.20 It is a statutory duty for the Council to determine and keep under review its Affordable Borrowing Limits.

3.21 During the quarter ended 30 September 2025, the Council has operated within the treasury and prudential indicators set out in the Council’s Treasury Management Strategy Statement for 2025/26. The Corporate Director - Resources reports that no difficulties are envisaged for the current or future years in complying with these indicators.

3.22 The prudential and treasury Indicators are shown in Appendix F.

Impact of Treasury Management Activities on the Revenue Budget

3.23 Based on the Treasury Management activity at Q2 2025/26 and a forecast for the remainder of the year, the revenue impact is as follows:

At the close of Q2, the total Interest and Dividends forecast to be received at the end of the year is £24.9m, in line with budget.

The forecast outturn for interest paid on long term borrowing is £13.3m, comprising of £9.8m General Fund Debt, and £3.5m HRA Debt.

The forecast outturn for the Minimum Revenue Provision (MRP) is £14.7m.

Capital Strategy

3.24 The Capital Strategy was included as part of the Council’s Annual Treasury Management and Investment Strategy 2025/26, approved in February 2025. The Capital Strategy sets out how capital expenditure, capital financing and treasury management contribute to the provision of Corporate and service objectives and properly takes account of stewardship, value for money, prudence, sustainability and affordability. It sets out the long term context in which capital expenditure and investment decisions are made and gives due consideration to both risk and reward and impact on the achievement of priority outcomes.

3.25 Alternative non-treasury investments are considered as part of the Capital Strategy. Given the technical nature of potential alternative investments and strong linkages to the Council’s Treasury Management function, appropriate governance and decision making arrangements are needed to ensure robust due diligence in order to make recommendations for implementation. As a result, all investments are subject to consideration and where necessary recommendations of the Commercial Investment Board.

3.26 The alternative investments considered by the Commercial Investment Board are as follows:

Type of Investment	Invested as at 30/09/2025 £m	Rate of Return %
Alternative Treasury Instruments
Money Market Funds	0.0	0.00
Enhanced Cash Funds	0.0	0.00
Certificates of Deposit (CDs)	0.0	0.00
Property Funds	12.4	4.00
Total Alternative Treasury Instruments	12.4	4.00
Alternative Investments
Loans to Council Companies
- Yorwaste	3.7	8.00
- Brierley	24.5	10.00
- Brierley 2	1.4	4.00
- First North Law	0.1	8.00
- NY Highways	9.0	10.00
- Broadacres Housing Association	33.6	4.26
- Bracewell Housing Ltd	0.7	9.50
- Align Property Services	0.5	10.00
Total Loans to Council Companies	73.5	7.15
Other Alternative Investments
Spend to Save	0.0	0.00
Loans to Housing Associations	0.0	0.00
Local Economic Growth Projects	0.0	0.00
Solar Farm (or similar) Projects	0.0	0.00
Commercial Investments	11.9	2.36
Total Other Alternative Investments	11.9	2.36
Total Alternative Investments	97.8	6.17

3.27 The position on Property Funds at 30 September is as follows:-

In Year Performance

			In Year Performance Q2 2025/26
Fund	Bwd Investment Valuation	Valuation as at 30/09/25	Capital Gain / (Loss)		Revenue Return
	£000	£000	£000	%	£000	%
Blackrock	4,840.3	4,857.6	17.3	0.4	78.3	2.9
Threadneedle	4,737.6	4,745.1	7.5	0.2	115.0	4.2
Hermes	1,818.4	-		-	15.0	3.5
Fidelity	2,774.4	2,767.3	-7.1	-0.3	68.0	4.2
Total	14,170.7	12,370.0	17.8	0.1	276.3	4.0

Total Fund Performance

			Total Performance
Fund	Investment £k	Valuation as at 30/09/2025	Capital Gain / (Loss)		Forecasted Revenue Return
	£000	£000	£000	%	£000	%
Blackrock	5,505.5	4,857.6	-647.9	-11.8	819.7	14.9
Threadneedle	5,366.3	4,745.1	-621.2	-11.6	1.119.3	20.9
Hermes	2,000.0	-	-	-	394.7	19.7
Fidelity	3,000.0	2,767.3	-22.7	-7.8	742.2	24.7
Total	15,871.8	12,370.0	-1501.8	-9.5	3,075.9	19.4

3.28 While Property Funds continue to provide a revenue return as noted in the table above, the funds have experienced some capital losses.

3.29 Property funds are long term investments and valuations can, therefore, rise as well as fall, over the period they are held. In order to mitigate any potential future loss, funds will be set aside to ensure there is no impact on the General Fund until units in the funds are sold.

3.30 As outlined in the Q4 24/25 Treasury Report, dealing in Shares of the Hermes Property Fund had been temporarily suspended due to a large quantum of redemption notices received. Subsequent to an EGM in February 2025, Fund investors voted overwhelmingly to pursue merger discussions with L&G Managed Property Fund (L&GMPF), which can only accept investment from registered UK defined benefit and defined contribution pension schemes. As a result of this, the Council’s holdings in the Hermes Property Fund (£1,8m) were paid out in cash at the time of the Merger, on 20 August. The subsequent capital loss of £188.6k will be covered by funds set aside for this purpose resulting in no impact on the General Fund.

3.31 Given the volatility and risk within the market, all property funds will be reviewed in terms of their strategies to mitigate risk within their portfolios, in the context of the longer term nature of these investments. Should any changes to these investments be considered necessary, these will be reported to the Executive and to Council if required.

3.32The position on Commercial Property investments and Alternative Property Investments at 30 September 2025 is as follows:-

Commercial Properties			Performance
Property	Investment £k	Valuation as at 31/03/25	Total Capital Gain / (Loss)		Forecasted Return
	£000	£000	£000	%	%
Bank Unit in Stafford Town Centre	876.0	525.0	(351.0)	(40.0)	6.05
Co-op Store in Somercotes	1,497.3	1,170.0	(327.3)	(22.0)	6.00
Total	2,373.3	1,695.1	(678.3)	(29.0)	6.02

Alternative Property Investments			Performance
Property	Investment £k	Valuation as at 31/03/2025	Total Capital Gain / (Loss)		Forecasted Return
	£000	£000	£000	%	%
Harrogate Royal Baths	9,504.0	6,300.0	(3,204.0)	(33.7)	1.45

3.33 Commercial Property is a long term investment and valuations can, therefore, rise as well as fall, over the period they are held. In order to mitigate any potential future loss funds will be set aside to ensure that there is no impact on the General Fund at the point of any future sale.

3.34 The Council continues to review potential commercial investments, but will now consider any potential investment opportunities alongside the implications for PWLB borrowing going forward, however, the 2025/26 Capital Plan does not include any plans to purchase commercial assets primarily for yield.

Other Loans

3.35 The Council has also provided the following loan facilities:-

Lender

Date Advanced

Original Loan

Interest Rate

Loan

Outstanding as at

30/06/2025

Revenue Return (as at 30/06/2025)

£000

Settle Pool

Sep-22

135.0

6.00

82.8

1.4

6.00

3.36 Settle Area Swimming Pool is a charity run swimming pool service for the local Settle area. In December 2023, discussions with the charity operating the pool led to a revision of the payment plan on the Long Term Loan provided by the council to support the operation of the pool. The revised arrangement has been provided at a commercial rate of 6%, and schedules the loan to be fully repaid by 2032/33.

Proposal to increase select Treasury Management Counterparty Limits

3.37 An Approved Lending List for Treasury Management Investments was established for North Yorkshire Council as part of the Annual Treasury Management Strategy approved in February 2023. The investment limits for approved counterparties included in the Strategy were set based on estimates of expected balances at that point.

Investment balances have increased year on year in the period since 1 April 2023 and now average £649m from an initial investment balance of £497m. As a result, higher investment balances now present an increased risk of insufficient capacity to place deposits with approved counterparties within the approved limits.

Following a review of the Approved Lending List in conjunction with the Councils Treasury Management Advisers, MUFG Corporate Markets, investment limits have been rationalised (proportionate to increased invested balances) to provide greater scope and capacity for treasury investment.

In order to maintain security of capital, liquidity of investments and to ensure uplifts in investment limts does not result in an over-utilisation of a particular counterparty, the proposed increase in limits have been spread over specific counterparties already included on the Approved Lending List. The Counterparties selected represent those with a strong RAG rating from MUFG Corporate.

As a result, the Corporate Director – Resources, under delegated authority, has approved the following amendments to the Approved Lending List with effect from 1 December 2025:

Counterparty	Type	Current Limit £m	Proposed New Limit £m	Movement £m	Movement %
Barclays Bank PLC	Call Account	90	120	30	33
Lloyds Bank PLC	Call Account	80	100	20	25
Total Call		170	200	50	29
Sumitomo Mitsui Banking Corporation	Fixed Term	80	100	20	25
Goldman Sachs	Fixed Term	80	100	20	25
DBS Bank	Fixed Term	40	50	10	25
Landesbank-Hessen-Thueringen Girozentrale (Heleba)	Fixed Term	40	50	10	25
National Bank of Canada	Fixed Term	40	50	10	25
Local Authorities (Limit Per individual LA)	Fixed Term	30	40	10	33
Total Fixed	Fixed Term	310	390	80	26
Total Proposal		480	610	130	27

RECOMMENDATIONS

3.38 That Executive

i. notes the position on the Council’s Treasury Management activities during the second quarter of 2025/26

ii. refers this report to the Audit Committee for their consideration as part of the overall monitoring arrangements for Treasury Management.

TREASURY MANAGEMENT APPENDICES

Appendix A	Analysis of investments placed as at 30 September 2025
Appendix B	Approved Lending List with counterparty limits
Appendix C	Changes to the Approved Lending List during Q2 2025/26
Appendix D	Treasury Management Monitoring and Reporting Arrangements 2025/26
Appendix E	Detailed Economic Commentary on Developments during Q2 2025/26
Appendix F	Treasury and Prudential Indicators
Appendix G	Proposed Increases to Treasury Management Counterparty Limits

Appendix A

Analysis of loans outstanding as at 30 September 2025

Actual Loans Outstanding – Summarised by Organisation

£m

Local Authority 357.5

Santander 62.0

Goldman Sachs 50.0

Helaba 40.0

National Bank of Canada 25.0

DBS 15.0

Sumitomo Mitsui BCE 65.0

Barclays 21.3

Bank of Scotland 75.0

Total 710.8

Other Bodies
	30-Sep-25		30-Jun-25
	£m	%	£m	%
NY Pension Fund	9.9	1.4	10.6	1.6
NY Fire and Rescue Authority	1.9	4.5	27.8	4.2
Yorkshire Dales National Park	6.2	0.9	6.4	1.0
North York Moors National Park	8.9	1.3	7.7	1.2
Peak District National Park	10.5	1.5	10.5	1.6
Align Property Services First North Law	1.6 0.1	0.2 0.0	1.3 0.1	0.2 0.0
National Parks England	0.9	0.1	1.0	0.2
Align Property Partners	1.5	0.2	1.8	0.3
Y&NY Combined Authority	65.3	9.2	72.8	11.0
Total Other Bodies Cash Balances held by NYC	136.7	19.2	139.9	21.1
Total Other Bodies Cash Balances held by NYC	574.1	80.8	523.0	78.9
Total Investment	710.8	100.0	662.9	100.0

Rates as at 30 September 2025
			%
Bank Rate			4.00
Investment Rates - NYC overnight (on call)			3.55
- 1 month			4.20
- 6 months			4.10
- 1 year			4.10
- Government Debt Management Office Account			3.96

Appendix D

Treasury Management and Reporting Arrangements

The current monitoring and reporting arrangements in relation to Treasury Management activities are as follows:

(a) an annual report to Executive and Full Council as part of the Budget/MTFS process that sets out the Council’s Treasury Management and Investment Strategy and Policy for the forthcoming financial year. For 2025/26 this report was submitted to Executive on 21 January 2025 followed by Full Council on 14 February 2025;

(b) an annual report to Executive and Full Council as part of the Budget/MTFS process that sets the various Prudential Indicators (submitted to Executive on 21 January 2025 and Full Council on 14 February 2025)

(c) annual outturn reports to the Executive for both Treasury Management and Prudential Indicators setting out full details of activities and performance during the preceding financial year. The outturn reports for 2024/25 were submitted to Executive on 27 May 2025;

(d) a quarterly report on Treasury Management to the Executive (this report) as part of the Quarterly Performance Monitoring report;

(e) periodic meetings between the Corporate Director – Resources, the Corporate Affairs Portfolio Holder and the Chairman of the Audit Committee to discuss issues arising from the day to day management of Treasury Management activities;

(f) reports on proposed changes to the Council’s Treasury Management activities are submitted to the Audit Committee for consideration and comment. A copy of this report is also provided to Audit Committee Members.

Appendix E

Detailed Economic Commentary on Developments during Q1 2025/26

Economic Background - UK

The first half of 2025/26 saw:

• A 0.3% pick up in GDP for the period April to June 2025. More recently, the economy flatlined in July, with higher taxes for businesses restraining growth;

• The 3m/yy rate of average earnings growth excluding bonuses has fallen from 5.5% to 4.8% in July;

• CPI inflation has ebbed and flowed but finished September at 3.8%, whilst core inflation eased to 3.6%;

• The Bank of England cut interest rates from 4.50% to 4.25% in May, and then to 4% in August;

• The 10-year gilt yield fluctuated between 4.4% and 4.8%, ending the half year at 4.70%

From a GDP perspective, the financial year got off to a bumpy start with the 0.3% m/m fall in real GDP in April as front-running of US tariffs in Q1 (when GDP grew 0.7% on the quarter) weighed on activity. Despite the underlying reasons for the drop, it was still the first fall since October 2024 and the largest fall since October 2023. However, the economy surprised to the upside in May and June so that quarterly growth ended up 0.3% q/q. Nonetheless, the 0.0% m/m change in real GDP in July will have caused some concern, with the hikes in taxes for businesses that took place in April this year undoubtedly playing a part in restraining growth. The weak overseas environment is also likely to have contributed to the 1.3% m/m fall in manufacturing output in July. That was the second large fall in three months and left the 3m/3m rate at a 20-month low of -1.1%. The 0.1% m/m rise in services output kept its 3m/3m rate at 0.4%, supported by stronger output in the health and arts/entertainment sectors. Looking ahead, ongoing speculation about further tax rises in the Autumn Budget on 26 November will remain a drag on GDP growth for a while yet. GDP growth for 2025 is forecast by Capital Economics to be 1.3%.

Sticking with future economic sentiment, the composite Purchasing Manager Index for the UK fell from 53.5 in August to 51.0 in September. The decline was mostly driven by a fall in the services PMI, which declined from 54.2 to 51.9. The manufacturing PMI output balance also fell, from 49.3 to 45.4. That was due to both weak overseas demand (the new exports orders balance fell for the fourth month in a row) and the cyber-attack-induced shutdown at Jaguar Land Rover since 1 September reducing car production across the automotive supply chain. The PMIs suggest tepid growth is the best that can be expected when the Q3 GDP numbers are released.

Turning to retail sales, and the 0.5% m/m rise in volumes in August was the third such rise in a row and was driven by gains in all the major categories except fuel sales, which fell by 2.0% m/m. Sales may have been supported by the warmer-than-usual weather. If sales were just flat in September, then in Q3 sales volumes would be up 0.7% q/q compared to the 0.2% q/q gain in Q2.

With the November Budget edging nearer, the public finances position looks weak. Public net sector borrowing of £18.0bn in August means that after five months of the financial year, borrowing is already £11.4bn higher than the OBR forecast at the Spring Statement in March. The overshoot in the Chancellor’s chosen fiscal mandate of the current budget is even greater with a cumulative deficit of £15.3bn. All this was due to both current receipts in August being lower than the OBR forecast (by £1.8bn) and current expenditure being higher (by £1.0bn). Over the first five months of the financial year, current receipts have fallen short by a total of £6.1bn (partly due to lower-than-expected self-assessment income tax) and current expenditure has overshot by a total of £3.7bn (partly due to social benefits and departmental spending). Furthermore, what very much matters now is the OBR forecasts and their impact on the current budget in 2029/30, which is when the Chancellor’s fiscal mandate bites. As a general guide, Capital Economics forecasts a deficit of about £18bn, meaning the Chancellor will have to raise £28bn, mostly through higher taxes, if she wants to keep her buffer against her rule of £10bn.

The weakening in the jobs market looked clear in the spring. May’s 109,000 m/m fall in the PAYE measure of employment was the largest decline (barring the pandemic) since the data began and the seventh in as many months. The monthly change was revised lower in five of the previous seven months too, with April’s 33,000 fall revised down to a 55,000 drop. More recently, however, the monthly change was revised higher in seven of the previous nine months by a total of 22,000. So instead of falling by 165,000 in total since October, payroll employment is now thought to have declined by a smaller 153,000. Even so, payroll employment has still fallen in nine of the ten months since the Chancellor announced the rises in National Insurance Contributions (NICs) for employers and the minimum wage in the October Budget. The number of job vacancies in the three months to August stood at 728,000. Vacancies have now fallen by approximately 47% since its peak in April 2022. All this suggests the labour market continues to loosen, albeit at a declining pace.

• A looser labour market is driving softer wage pressures. The 3m/yy rate of average earnings growth excluding bonuses has fallen from 5.5% in April to 4.8% in July. The rate for the private sector slipped from 5.5% to 4.7%, putting it on track to be in line with the Bank of England’s Q3 forecast (4.6% for September).

CPI inflation fell slightly from 3.5% in April to 3.4% in May, and services inflation dropped from 5.4% to 4.7%, whilst core inflation also softened from 3.8% to 3.5%. More recently, though, inflation pressures have resurfaced, although the recent upward march in CPI inflation did pause for breath in August, with CPI inflation staying at 3.8%. Core inflation eased once more too, from 3.8% to 3.6%, and services inflation dipped from 5.0% to 4.7%. So, we finish the half year in a similar position to where we started, although with food inflation rising to an 18-month high of 5.1% and households’ expectations for inflation standing at a six year high, a further loosening in the labour market and weaker wage growth may be a requisite to UK inflation coming in below 2.0% by 2027.

An ever-present issue throughout the past six months has been the pressure being exerted on medium and longer dated gilt yields. The yield on the 10-year gilt moved sideways in the second quarter of 2025, rising from 4.4% in early April to 4.8% in mid-April following wider global bond market volatility stemming from the “Liberation Day” tariff announcement, and then easing back as trade tensions began to de-escalate. By the end of April, the 10-year gilt yield had returned to 4.4%. In May, concerns about stickier inflation and shifting expectations about

the path for interest rates led to another rise, with the 10-year gilt yield fluctuating between 4.6% and 4.75% for most of May. Thereafter, as trade tensions continued to ease and markets increasingly began to price in looser monetary policy, the 10-year yield edged lower, and ended Q2 at 4.50%.

More recently, the yield on the 10-year gilt rose from 4.46% to 4.60% in early July as rolled-back spending cuts and uncertainty over Chancellor Reeves’ future raised fiscal concerns. Although the spike proved short lived, it highlighted the UK’s fragile fiscal position. In an era of high debt, high interest rates and low GDP growth, the markets are now more sensitive to fiscal risks than before the pandemic. During August, long-dated gilts underwent a particularly pronounced sell-off, climbing 22 basis points and reaching a 27-year high of 5.6% by the end of the month. While yields have since eased back, the market sell-off was driven by investor concerns over growing supply-demand imbalances, stemming from unease over the lack of fiscal consolidation and reduced demand from traditional long-dated bond purchasers like pension funds. For 10-year gilts, by late September, sticky inflation, resilient activity data and a hawkish Bank of England have kept yields elevated over 4.70%.

The FTSE 100 fell sharply following the “Liberation Day” tariff announcement, dropping by more than 10% in the first week of April - from 8,634 on 1 April to 7,702 on 7 April. However, the de-escalation of the trade war coupled with strong corporate earnings led to a rapid rebound starting in late April. As a result, the FTSE 100 closed Q2 at 8,761, around 2% higher than its value at the end of Q1 and more than 7% above its level at the start of 2025. Since then, the FTSE 100 has enjoyed a further 4% rise in July, its strongest monthly gain since January and outperforming the S&P 500. Strong corporate earnings and progress in trade talks (US-EU, UK-India) lifted share prices and the index hit a record 9,321 in mid-August, driven by hopes of peace in Ukraine and dovish signals from Fed Chair Powell. September proved more volatile and the FTSE 100 closed Q3 at 9,350, 7% higher than at the end of Q1 and 14% higher since the start of 2025. Future performance will likely be impacted by the extent to which investors’ global risk appetite remains intact, Fed rate cuts, resilience in the US economy, and AI optimism. A weaker pound will also boost the index as it inflates overseas earnings.

Appendix F

Prudential and Treasury Indicators for 2025/26 as of 30 September 2025

Capital Expenditure

	2025/26 TM Strategy	2025/26 Forecast
	£m	£m

New Capital Expenditure	327.4	294.5
New Finance Leases and PFI	0.0	1.7
Total Capital Expenditure	327.4	296.2
Financed by
- Capital grants and contributions	205.5	195.1
- Direct Revenue Funding	74.7	90.1
- Capital receipts	25.0	27.5
Capital Borrowing Requirement	22.2	16.5

Capital Financing Requirement (CFR)

	2025/26 TM Strategy			2025/26 Forecast
	Other Long Term Borrowing Liabilities		Total	Other Long Term Borrowing Liabilities		Total
	£m £m		£m	£m £m		£m
Total CFR	582.5	158.0	740.5	561.2	149.3	710.5
Net Financing need for year	22.2	0.0	22.2	8.9	1.7	10.6
MRP	-16.6	-5.9	-22.5	-15.9	-7.1	-23.0
Movement in CFR	5.6	-5.9	-0.3	-7.0	-5.4	-12.4

Authorised Limit, Operational Boundary and Actual Debt

	2025/26 TM Strategy			2025/26 Forecast
	Other Long Term Borrowing Liabilities		Total	Other Long Term Borrowing Liabilities Total
	£m £m		£m	£m	£m	£m
Authorised Limit	441.1	202.8	643.7	437.1	194.3	631.4
Operational Boundary	421.1	202.6	623.7	417.1	194.3	611.4
External Debt	354.4	158.0	512.4	350.4	149.3	499.7

Gross Debt and the CFR

	2025/26 TM Strategy Other Long Term Borrowing Liabilities Total £m £m £m			2025/26 Forecast Other Long Term Borrowing Liabilities Total £m £m £m
CFR	582.5	158.0	740.5	561.2	149.3	710.5
Gross Borrowing	354.4	158.0	512.4	350.4	149.3	499.7
Under / (over) borrowing	228.1	0.0	228.1	210.8	0.0	210.8

Ratios

	2025/26 TM Strategy %	2025/26 Forecast %
Financing costs to net revenue stream (Non-HRA)	3.65	2.73
Financing costs to net revenue stream (HRA)	10.83	9.62
Net income from commercial and service investments to net revenue stream	0.77	0.81

Liability Benchmark

Maturity Structure of Borrowing

	2025/26 Forecast Lower Upper Limit Limit Forecast % % %
Under 12 months	0	15	4
12 months to 2 years	0	15	7
2 years to 5 years	0	15	4
5 years to 10 years	0	25	16
10 years to 20 years	0	25	5
20 years to 30 years	0	45	41
30 years to 40 years	0	45	16
40 years to 50 years	0	45	7

Limits for Long Term Treasury Management Investments

2025/26 Forecast

Limit Forecast

£m £m

Limit on investments > 1 year

60.0

0.0

Appendix G

Proposed Increases to Treasury Management Counterparty Limits

	Country	Specified Investments (up to 1 year)		Non-Specified Investments (> 1 year £40m limit)
	Country	Total Exposure £m	Time Limit *	Total Exposure £m	Time Limit *
UK "Nationalised" banks / UK banks with UK Central Government involvement
Royal Bank of Scotland PLC (RFB)	GBR	90.0	365 days	-	-
National Westminster Bank PLC (RFB)	GBR	90.0	365 days	-	-
UK "Clearing Banks", other UK based banks and Building Societies
Santander UK PLC (includes Cater Allen)	GBR	80.0	6 months	-	-
Barclays Bank PLC (NRFB)	GBR	90.0	100 days	-	-
Barclays Bank UK PLC (RFB)	GBR	90.0	6 months	-	-
Bank of Scotland PLC (RFB)	GBR	80.0	365 days	-	-
Lloyds Bank PLC (RFB)	GBR
Lloyds Bank Corporate Markets PLC (NRFB)	GBR
Goldman Sachs International Bank	GBR	80.0	6 months	-	-
Sumitomo Mitsui	GBR	80.0	6 months	-	-
Standard Chartered Bank	GBR	80.0	6 months	-	-
Handlesbanken	GBR	80.0	365 days	-	-
Nationwide Building Society	GBR	40.0	6 months	-	-
Leeds Building Society	GBR	40.0	3 months	-	-
Coventry Building Society	GBR	40.0	6 months	-	-
High Quality Foreign Banks
National Australia Bank	AUS	40.0	365 days	-	-
Credit Industriel et Commercial	FRA	40.0	365 days	-	-
Landesbank Hessen-Thueringen Girozentrale (Helaba)	GER	40.0	365 days	-	-
DBS (Singapore)	SING	40.0	365 days	-	-
Bayerische Landesbank	GER	40.0	365 days	-	-
National Bank of Canada	CAN	40.0	6 months	-	-
Local Authorities
County / Unitary / Metropolitan / District Councils		30.0	365 days	5.0	5 years
Police / Fire Authorities		30.0	365 days	5.0	5 years
National Park Authorities		30.0	365 days	5.0	5 years
Other Deposit Takers
Money Market Funds		40.0	n/a liquid	-	-
Property Funds		5.0	365 days	5.0	10 years
UK Debt Management Account		150.0	365 days	-	-