Reorganisation placing strain on council capacity and resilience, LGA annual report on peer challenges says

The findings were highlighted in an LGA analysis of common themes and observations emerging from the peer challenges and reviews undertaken in 2025/26.

In a report detailing its findings, the LGA said the councils it worked with commonly struggled with rising demand and cost pressures in children’s and adult social care, significant and growing Special Educational Needs and Disabilities (SEND) pressures, and workforce challenges.

It also highlighted escalating housing and homelessness challenges, alongside the need to sustain service performance while delivering transformation and savings.

Other common issues included the importance of strong place and organisational leadership, effective governance and scrutiny, robust performance and data arrangements, and maintaining financial sustainability – "in particular during LGR, which compounds many of these issues", it said.

The report said that the impact of LGR "features strongly" across all the key areas of the peer challenge framework.

According to the LGA, peer findings highlighted the importance of having a clear and well-aligned vision and priorities, effective communication and stakeholder engagement, robust governance and performance arrangements, and the organisational capacity and resilience needed to manage reorganisation alongside day-to-day service delivery.

“The consistency of these messages demonstrates that LGR remains a significant test of stability, capability and prioritisation for councils, underscoring the value of sector led improvement support during periods of major structural change.”

Elsewhere, the analysis said that delivering required savings "continues to be increasingly difficult", even with the introduction of a multi-year funding settlement, despite examples of prudent financial management and innovation in many authorities.

The LGA called for sustained, long-term funding and wider public sector reform in light of these challenges.

On leadership, governance and culture, the report said the corporate peer challenge programme was a "key improvement tool" that allowed local authorities to address their own challenges "without central government or regulators needing to become involved".

The report meanwhile said organisational capacity "remains a significant challenge" for councils, with workforce pressures the most frequently cited issue and staff continuing to deliver services amid rising demand, financial pressures and LGR.

It also noted that concerns about data and artificial intelligence are being raised "more consistently" than in previous years, reflecting their growing use across authorities.

On this point, peer review reports emphasised the need for councils to adopt structured, risk-aware and ethically grounded approaches to AI that align with customer and digital strategies, ensuring safe, effective and purposeful implementation, the LGA said.

Concluding, the report said councils are experiencing a backdrop of sustained and escalating pressures, which “are compounded further for councils undergoing local government re-organisation”.

It added: “Despite these challenges, councils continue to drive innovation and seek to harness the opportunities presented through devolution to improve outcomes for their communities.

“However, while the increased certainty offered by a multiyear funding settlement is welcome, the cumulative pressures identified in this report increasingly constrain the sector’s capacity to sustain delivery and improvement in the years to come.”

Adam Carey