Major British city declares bankruptcy as inflation and growing social care costs blow a $29 million hole in its budget

Nottingham, home to 323,700 residents, well-known universities and fictional character Robin Hood, effectively declared itself bankrupt on Wednesday as its council is set to to overspend by £23 million ($29 million) in the 2023-24 financial year. 

This means a pause on all non-essential spending on services not required to be provided by law.

A report raised at the Labour-run Nottingham City Council’s Executive Board meeting last week first revealed the budget shortfall.

The Nottingham City Council highlighted that it was facing a slew of challenges resulting in the gaping hole in its budget in a Wednesday report. These include high demand providing adult and child social care packages, growing homelessness, inflation and insufficient income. Other issues surrounding financial governance also exacerbated the problem. 

In a statement given to multiple British outlets, the council said it was not “insolvent” and had “sufficient financial resources to meet all of its current obligations, to continue to pay staff, suppliers and grant recipients in this year.”

Nottingham City Council didn’t immediately return Fortune’s request for comment.

The bankruptcy bandwagon

Nottingham isn’t the first significant city in Britain to tread in bankruptcy territory—in September, Birmingham, the U.K.’s second-largest city, also did the same after not not having enough money to pay off $955 million’s worth of equal pay claims to government employees. Its city council said at the time that it faced a deficit of £87 million ($109 million) in the current financial year.

Other cash-strapped councils like Woking and Croydon have also declared bankruptcy in the past, which has sometimes resulted in taxes being increased as a way to boost finances. 

But this might just be the tip of the iceberg—in the following two years, councils in England could see funding gaps climb to nearly £3 billion ($3.8 billion), estimates by government relations group Local Government Association suggests. 

As for Nottingham, the bankruptcy could point to a broken funding system and broader structural issues.

“There are fundamental systemic issues with the local government finance system that have resulted in an increasing number of councils reaching breaking point,” Stephen Houghton, the chair of the Special Interest Group of Municipal Authorities told the Guardian.

“Nottingham City Council has fallen victim to the Government’s neglect of our vital local services,” Adana Godden, organizer at GMB Union, which is Nottingham City Council’s largest staff union, said in a statement Wednesday in response to the bankruptcy filing.

“The Council’s funding has been cut by more than 40 per cent since 2010; it’s shocking that this Government are sitting on the side lines as local communities suffer. This news will no doubt cause great anxiety for workers in Nottingham.”