Councils across England, Scotland and Wales have a collective hole in their finances amounting to more than £4 billion for the coming financial year, way beyond any previous estimates, said research from trade union Unison.

New figures, based on information from local authorities, show council funding is in a dire state with massive cuts likely to essential services and jobs, said the union.

The report, titled ‘Councils on the Brink’, warned that failure to rectify the growing problem soon risks “the widespread collapse of local government”.

Many authorities could be forced to sell land, buildings and other capital assets, as well as cut back vital community services like rubbish collection and recycling, libraries, public toilets and leisure centres even further, Unison warned.

According to Unison’s research, the five councils with the biggest predicted shortfalls for 2025/26 account for a half-billion-pound funding gap. These are Hampshire County Council (£132 million), Bradford City Council (£126 million), Birmingham City Council (£119 million), Somerset Council (£104 million) and Leicester City Council (£90 million).

The funding gap measures the difference between each council’s income and the amount needed to maintain promised service levels. But as the shortfall grows between the cash local authorities need and what they actually have to spend, crucial services and jobs are being slashed. This is having a potentially catastrophic and far-reaching effect upon communities, says Unison.

For example, Hampshire County Council has proposed withdrawing all spending on homelessness support services across the county from March 2025.

In March this year, Britain’s largest authority, Birmingham City Council, approved one of the biggest local government cuts packages in history – including plans to scrap up to 600 jobs, slash social care and children’s services funding and reduce waste collections.

Middlesbrough Council has set aside £3.6 million for future redundancies as it tries to save a further £21 million by 2026/27. East Riding Council has told staff it could scrap any post that has been vacant for more than six months.

Without urgent government support, the union warned that the combined funding shortfall could balloon to £8.5 billion by 2026/27, leaving many councils struggling to provide essential local services and protect jobs.

Unison’s figures, based on freedom of information requests and councils’ own financial forecasts, paint a far bleaker picture than other estimates.

In England alone, the gap is expected to reach £3.4 billion by 2025/26, significantly surpassing the £2.3 billion projection published by the Local Government Association for English councils in June.

Years of austerity mean services have already been cut substantially, with widespread job losses and a reduction in vital support for some of the UK’s most deprived areas, says Unison.

Many local authorities are now on the brink of financial collapse and the union says this new data suggests many more could soon follow suit.

Since 2018, eight councils – including Birmingham – have issued section 114 notices, meaning they risk failing to meet the legal requirement to balance their books.

Unison’s data also revealed the local authorities facing the biggest predicted funding gaps relative to their annual budgets. While unitary or county councils delivering vital adult care and children’s services remain under enormous pressure, the huge financial strain on many districts is even more apparent when measured this way.

At Eastleigh Borough Council, the estimated £4.9 million funding gap for 2025/26 represents 37.2% of its £13.1 million annual revenue budget. Other councils where predicted shortfalls represent a considerable proportion of day-to-day spending plans include Rushmoor Borough Council (34.6%) and Thurrock Council (30.9%).

Thurrock issued a section 114 notice in 2022 amid a financial emergency caused partly by a high-risk investment strategy and a £469 million budget deficit. The authority was later subject to government intervention.

Unison general secretary Christina McAnea said: “Councils are teetering on the brink of financial disaster. Countless essential services and very many vital jobs are at risk, with terrible consequences for communities across Britain.

“After 14 years of ruthless austerity, the very fabric of local society is under threat. Councils are quite simply the linchpin of local areas, so when services go, many people are left vulnerable, with no one to pick up the pieces.

“Local authorities were clobbered by the previous government, whose harsh financial settlements left councils with no option but to sell off the family silver, auction off green spaces, close key community facilities and let thousands of workers go. Only swift and decisive action to stabilise local finances will do.

“Labour has inherited a mess, with essential services battered and bruised. The new government understands the value of healthy public services and the role they can play in generating economic growth, in a way its predecessors simply didn’t. So as tough as the financial situation may be, ministers cannot ignore the terrible plight of authorities of every political persuasion.

“There’s an unquestionable need to turn the page on the destructive cuts of the past and invest in services and staff to help councils rebuild Britain.”