London’s council funding crisis is set to deepen dramatically, with seven boroughs expected to require emergency government bailouts to balance their books in 2025-26, according to alarming new figures from London Councils.

The number of boroughs needing Exceptional Financial Support (EFS) has more than tripled from last year, with emergency funding requirements soaring from £70m to £430m – a staggering 500% increase. This comes despite a 5.7% boost to councils’ Core Spending Power in the latest local government finance settlement.

London Councils warns that the capital faces a £500m funding gap next year, with the homelessness emergency placing particularly severe strain on borough finances. Councils are currently spending around £4m daily on temporary accommodation, with homelessness services overspending their budgets by £270m – double the figure from last year.

“Hard times are still here for boroughs’ budgets,” says Cllr Claire Holland, Chair of London Councils. “Having faced more than a decade of structural underfunding, councils in the capital remain under enormous financial strain.”

The crisis extends beyond housing, with significant overspending reported across key services: £180m on adult social care and £150m on children’s services. The situation is particularly concerning given that borough funding per Londoner has fallen by 28% since 2010, despite an 11% population increase.

The scale of London’s homelessness emergency is highlighted by estimates suggesting at least one in 50 Londoners is currently homeless, including approximately one homeless child in every London classroom.

While London Councils welcomes the upcoming Spending Review as an opportunity to advocate for increased investment, the organization warns that without significant reform to local authority funding, more boroughs may face financial crisis in the coming years.