Top risks for Local Authorities in 2025/26

Key Summary

The current risk landscape for local government always comes back to financial sustainability, with 83% of local authorities identifying this as their top risk in our Public Sector in Focus survey. Since 2020, there have been at numerous S114 notices, and conversations with our clients signal to many more narrowly avoided or requests for exceptional funding submitted to central government. 

Risk management across the sector is generally siloed and not ‘live’ in Councils. This is a significant barrier to effectively managing risks within the sector. 

Recruitment and retention

Recruitment and retention continues to be a top challenge across the sector, with 61% of local authorities highlighting workforce challenges as being the biggest risk to their organisation the next 12 months. Local authorities need to rethink, refresh and reinvent their current approaches for recruitment and retention as they start thinking about the way forward. This needs targeted plans around identifying and developing skills such as in project management, leadership and analytical/data. Local authorities need to develop longer term workforce strategies, leveraging Employee Value Propositions to meet the expectations of employees; particularly in the context of financial sustainability challenges limiting local authorities' ability to compete with other public and private sector organisations.

Local authorities are facing a wave of new legislation that they need to contend with, including the Procurement Act 2023, which came into effect on 24 February 2025, and the Failure to Prevent Fraud Offence, set to be enforced later this year.

The Procurement Act 2023

The Procurement Act 2023 is set to significantly transform the UK's procurement approach, providing local authorities with the opportunity to promote efficient, transparent, and accountable procurement processes. However, local authorities should be aware of several key challenges. These include the need to comply with two legal frameworks simultaneously until existing frameworks and contracts are fully phased out, ensuring increased transparency for suppliers regarding future procurement activities, which requires careful planning and the publication of upcoming pipeline notices, and integrating procurement with contract management, especially where Key Performance Indicators (KPIs) will be implemented. Effectively managing these changes is crucial for local authorities.

Digital transformation

The use of data and AI is presenting new and emerging challenges in the sector. There can be little doubt that AI is the technology of the moment, as organisations seek to use its capabilities to drive efficiency and productivity. The investment in AI, led by the US tech giants, is nothing short of astonishing, and is at the heart of UK Government strategy with the AI opportunities action plan. We are starting to see signs of local authorities embedding AI into their digital transformation initiatives as the use cases behind the practical applications become clearer, though there is some way to go, whilst ensuring sufficient governance and management of associated risks with AI.

The current environment landscape is placing greater emphasis on driving efficiencies and increasing productivity. As a result, a number of local authorities are putting in place projects and programmes to address their needs.  

•     Programmes and projects can benefit from assurance at any stage in their lifecycle – reducing the risk of scope creep, time overruns and cost escalations. It ensures that the right resources and tools are in place to allow for successful delivery and successful benefits utilisation (ROI). Maintaining this practice throughout the project lifecycle ensures continuous alignment, adaptability to changes, and sustained focus on achieving the desired outcomes.

•     Notwithstanding all of the above, and the continued pressures local authorities face around financial sustainability, it is important also not to lose sight of the basics and “Business as Usual” ensuring control frameworks continue to function.