16th May 2026
Manchester is under the microscope due to Andy Burnham getting ready to challenge for a seat as an MP and perhaps further if successful. Manchester has made great stride recently but much of it is founded on increased levels of debt. Highland is carrying one of the highest debt levels of any of the Scottish councils with a plan to invest hueg amount over 20 years. So lets compare.
Across the UK, local and regional authorities are entering a very different financial environment from the past decade. The era of ultra-cheap borrowing, abundant central support, and optimistic growth assumptions has given way to higher interest rates, tighter public finances, and more cautious investment conditions.
To understand what this means in practice, it is useful to stress-test two very different places:
Greater Manchester Combined Authority
The Highland Council
Both have ambitious long-term investment plans, both rely on public borrowing to varying degrees, and both are exposed to rising UK-wide financing costs. But the similarities largely end there. Their economic structures, fiscal resilience, and exposure to risk are fundamentally different.
1. The starting point: two very different financial realities
Greater Manchester: large economy, large balance sheet
Greater Manchester is a major UK city-region with:
a population of nearly 3 million,
a large and diversified private-sector economy,
strong inward investment,
and major regeneration and transport programmes.
Its debt position reflects this scale. Recent estimates place gross debt at roughly £1.4bn–£1.8bn, with longer-term capital financing requirements potentially exceeding £3bn over time.
Importantly, much of this borrowing is linked to:
transport expansion (including the Bee Network),
housing and regeneration,
and long-term infrastructure investment designed to stimulate economic growth.
This is often described as “productive debt” — borrowing intended to generate future returns.
Highland: smaller economy, high infrastructure cost base
Highland is structurally very different:
far smaller and more dispersed population,
vast geographic area (the largest council area in the UK),
high infrastructure costs per resident,
and a more limited commercial tax base.
Its total debt is around £1.3bn, but because the population is much smaller, this translates into a much higher debt-per-person burden (around £5,400+ per resident).
However, unlike Manchester, Highland does not have a large urban economy generating significant private-sector tax growth. Its investment model is therefore more dependent on:
Scottish Government funding,
targeted infrastructure grants,
and long-term national policy priorities (especially energy transition projects).
2. The new macro environment: why borrowing is now harder everywhere
Both areas are now operating in a fundamentally different financial climate:
UK interest rates are significantly higher than the 2010s–early 2020s period
Public Works Loan Board borrowing is more expensive
construction costs remain elevated
and UK fiscal policy is tighter due to wider national borrowing pressures
This matters because many long-term infrastructure programmes were designed under assumptions of:
cheap debt,
strong property markets,
and stable public funding growth.
Those assumptions are now under strain.
3. Stress Test 1: High interest rates (5–7% for several years)
Manchester impact
Higher rates affect:
refinancing of existing debt
cost of new infrastructure borrowing
viability of some regeneration projects
However, Manchester has advantages:
a large and growing tax base
diversified economy
ability to attract private investment
stronger revenue generation from transport and property
Result:
Investment slows and becomes more selective, but the system remains broadly stable.
Highland impact
For Highland, the same interest rate environment is more severe:
borrowing costs weigh heavily on a smaller revenue base
fewer projects generate direct financial return
long rural infrastructure costs remain fixed or rising
limited ability to offset costs through economic growth
Result:
Capital programmes are delayed, scaled back, or reprioritised more quickly than in urban areas.
4. Stress Test 2: UK recession or prolonged weak growth
Manchester
property market slows → regeneration pipelines weaken
commercial development slows
transport revenues stagnate
but population and business diversity provide resilience
Result: slowdown, not structural crisis.
Highland
tourism declines
construction activity slows
rural economic activity weakens
limited private-sector buffer
Result: sharper fiscal pressure and more immediate service strain.
5. Stress Test 3: Housing market downturn
Manchester
Housing-led regeneration is central to the city-region model:
falling property values reduce viability of development schemes
private-public partnerships become harder to structure
investment pipelines slow
Result: medium-term impact on growth strategy, but not core services.
Highland
Housing markets are smaller and less liquid:
impact is more about affordability and delivery than investment returns
less systemic financial exposure than Manchester
Result: less financial shock, but worsening supply constraints.
6. Stress Test 4: Scottish fiscal squeeze (critical for Highland)
This is one of the most important differentiators.
Economists have suggested a potential multi-billion-pound gap (e.g. £5bn scenario) in Scottish public finances depending on growth, UK fiscal transfers, and spending commitments.
While this would not automatically translate into equal cuts to councils, the transmission mechanism is important:
If the Scottish Government faces a fiscal gap, it typically responds by:
slowing growth in council funding
applying real-terms budget restraint
prioritising capital spending more tightly
and tightening approval for major investment projects
Highland impact under this scenario:
Highland is particularly exposed because:
it relies heavily on central government funding
it has limited local tax capacity
and it has high infrastructure needs per resident
Result: slower funding growth, delayed capital programmes, and more difficult trade-offs between services and investment.
7. Stress Test 5: Energy transition slowdown (Highland-specific risk)
Highland’s long-term investment strategy is closely tied to:
offshore wind expansion
grid infrastructure upgrades
port development (e.g. Cromarty Firth region)
hydrogen and green energy projects
If these fail to scale as expected:
projected future economic returns weaken
infrastructure may be underutilised
borrowing used to “front-load” development becomes harder to justify
Result: one of Highland’s key structural vulnerabilities.
8. Combined pressure scenario: the “triple squeeze”
The most important comparison is what happens when three pressures combine:
high interest rates
tighter Scottish public finances
weaker economic growth
Manchester in this scenario
slows investment pipeline
prioritises projects more tightly
but retains ability to refinance and adapt
uses scale of economy as buffer
Overall: constrained but stable system
Highland in this scenario
funding becomes more restrictive
borrowing becomes more expensive relative to revenue
infrastructure plans must be phased or reduced
greater reliance on Scottish Government priorities
Overall: structurally tighter and more constrained system
9. So are they both “on a knife edge”?
Not in the sense of financial crisis.
But both are:
more exposed than during the low-interest era
more sensitive to national fiscal conditions
and more dependent on assumptions about future growth
The difference is not whether they are risky, but how risk manifests.
10. Final comparison: which position is harder?
Greater Manchester Combined Authority
Strengths:
large, diverse economy
strong population growth
multiple revenue streams
better access to investment capital
Weaknesses:
large absolute debt exposure
dependence on continued growth assumptions
sensitivity to property and investment cycles
Overall position: high complexity, but strong economic engine behind it
The Highland Council
Strengths:
strategic importance to UK energy transition
potential long-term infrastructure investment pipeline
national policy interest in renewables and grid expansion
Weaknesses:
small and dispersed tax base
high per-capita infrastructure costs
heavy reliance on public funding
limited ability to generate internal returns
Overall position: structurally tighter financial capacity and higher sensitivity to funding and interest rates
Bottom Line
If stress-tested under modern economic conditions:
Manchester is more resilient because it has scale and economic depth
Highland is more constrained because it has higher costs and weaker internal revenue generation
Or put more simply:
Manchester’s challenge is managing the complexity of large-scale growth and debt.
Highland’s challenge is sustaining ambitious investment within a structurally tight fiscal environment.
Both can continue investing heavily over the next 20 years — but only if growth assumptions, interest rates, and government funding align more closely with expectations than they have in the recent past.
There are many variables for both Manchester and Highland and future politicians will need to deal with the increased debt levels now at record levels.
If they cannot then everyone will pay the price.