It breaks new ground for a Scottish local authority to tap the bond market in this way and shows that investors believe the council’s projected £1 billion capital investment programme for the city is realistic and achievable.
Aberdeen says the bond move highlights its commitment to economic growth by “utilising innovative funding mechanisms”, and follows the City Fathers achieving a Moody’s investor credit rating early last month – another Scottish council first.
There is also a little contra-thinking at work, as local authorities are traditionally wary of taking debt on via more sophisticated, complex means, not helped by the periodic scandals that break out in the City of London.
And perhaps there is an overhang of municipal suspicion from the often ill-starred flirtation with esoteric interest rate swaps between councils and banks in the 1990s. But the new bond undeniably gives Aberdeen City Council the greater financial flexibility that comes with diversified funding sources.
In these times of difficult challenges for many Scottish councils, not least a slump in oil price for Aberdeen in particular, it will be interesting to see whether some of its counterparts north of the Border follow the pioneering move.
Neurosis and split personality
If the construction sector was a person, it would be neurotic. The industry is one of the heavy-duty contributors to Britain’s GDP, but is notoriously volatile.
Part of the problem is that construction has a split personality – a three-way split. When housebuilding is doing well, commercial property can be in trouble and infrastructure in the doldrums. Or any variation on that.
Yesterday’s latest construction data showed growth hitting a seven-month high, reliably against expectations of a fall in activity.
Equally predictably, the Markit/Cips UK construction purchasing managers’ survey showed that slowing order books and surging prices for building materials hang like a shadow. Back to the psychiatrist’s sofa.