Britain bankruptcy: This UK city has declared itself bankrupt

Britain's second-largest city has reportedly declared itself bankrupt and has shut down all non-essential spending after being issued with equal pay claims totaling up to £760 million ($956 million).

According to a report by CNN, the deficit arose due to difficulties paying between around $816 million and around $954 million in equal pay claims.

Birmingham City Council said it has a shortfall of £87 million ($109 million) in the current financial year and also faces a “potential liability relating to equal pay claims in the region of £650 million to £760 million.”

Sharon Thompson, deputy leader of the council said it faces “longstanding issues, including the council’s historic equal pay liability concerns". Thompson also blamed the ruling Conservative Party, saying Birmingham “had £1 billion of funding taken away by successive Conservative governments.”

The Labour-run administration representing Birmingham issued a so-called 114 notice, putting a stop to all but essential spending and becoming the latest in a string of councils to plunge into financial distress.

Sharon added while the council is facing significant challenges, the city is very much still open for business.

Meanwhile, a spokesperson for UK Prime Minister Rishi Sunak said the responsibility for effective budget management lies on elected councils.

Birmingham City Council's bankruptcy reason:

One of the key reasons behind the city going bankrupt is the equal pay claim. The city's authority said it has been forced to pay out after a Supreme Court ruling in 2012 sided with a group of largely female employees who had missed out on bonuses that were given to staff in traditionally male-dominated roles at the council. It has already paid out more than £1 billion on the equal-pay claim and was also hit with costs from a new IT system.

The council also blamed “unprecedented financial challenges,” including inflation, rising demand for adult social care, and “dramatic reductions” in income from business taxes.

A Section 114 notice is issued by a council when it believes its income will not be able to meet spending. It is widely reported as effective bankruptcy for a council, meaning it cannot make new spending commitments. It often leads to a new budget with reduced expenditure.

Birmingham is a multi-cultural city in Central England that also hosted last year's Commonwealth Games. It is scheduled to hold the 2026 European Athletics Championship.