Boris Johnson urges local authorities to use bond markets after GLA raises £600m

The Mayor of London, Boris Johnson, has called on local government to consider accessing funds through the public markets, after the Greater London Authority raised £600m via a bond issue to help finance its share of the £14.8bn construction costs for Crossrail.

It was the first time in more than 17 years that a local authority has used a bond issue to raise capital finance.

The terms of the bond issue – delivered through a vehicle developed with Lloyds Bank Corporate Markets – made it 0.17% cheaper than raising funds through the government’s Public Works Loan Board, the authority said.

The GLA added that it planned to use this form of borrowing for other parts of its capital programme, predicting that it could save up to £65m on the cost of long-term borrowing for Crossrail. The authority is require to borrow £3.5bn to help finance Crossrail.

Johnson said: "Crossrail is going to transform our city but it must be cost effective, especially for London's businesses. This is a great example of the public and private sectors coming together and delivering an innovative solution to bear down on borrowing costs. I hope this is a model local government can develop for other important improvements we make to the capital and beyond."

Andrew Géczy, CEO of Wholesale Markets and Co-head of Lloyds Bank Corporate Markets said: “It is more than 17 years since a mainstream local authority has secured finance via the public markets, so this transaction is significant as well as innovative.”

Géczy said he fully expected other local authorities to follow suit, claiming that the note issuing programme framework created for the GLA would be “of real benefit” to the local authority sector as a whole.

“Local authorities wanting to raise financing, even relatively small sums in comparison to that raised by the GLA, will be able to access the capital markets to help them deliver their local projects and to do so in a more cost effective manner, and in a manner which is more administratively efficient as well,” he added.