L IKE MANY British seaside towns, Weston-super-Mare has seen better centuries. “Dismaland” was the title that Banksy, a guerrilla artist, chose for his show on the seafront in 2015. Attractions included the Grim Reaper riding the dodgems and Cinderella’s carriage in a crash. All the same, North Somerset council wasn’t going to miss the opportunity to pull in a few punters—less in a celebration of “entry-level anarchism”, as the artist put it, than a desperate stab at urban regeneration.

The same could be said of the Sovereign Shopping Centre, just up from the lido, which was bought by the council and Legal & General, a big investment company, last year for £21m ($28m). Nigel Ashton, the Conservative leader of the council, saw the purchase as an opportunity to regenerate the tired town centre. But he also hopes that it will provide the council with a vital new income stream.

Like all councils, North Somerset has seen the money that it receives from central government dwindle since the onset of austerity. In 2010 it got over £50m, making up a third of its budget. Next year the grant will disappear almost entirely. The council has reduced inefficiencies and cut some services. But Mr Ashton argues that he has also been forced to become “more businesslike and entrepreneurial” to plug the gap in Somerset’s finances. The council hopes to receive rent of about £1m a year from the shops in the Sovereign centre. Last year it bought another retail park, in nearby Worle, for £38m. Mr Ashton hopes this will eventually bring in about £600,000 a year to spend on services.

It is a strategy that has been adopted by both Tory- and Labour-controlled local authorities around Britain. Councils’ commercial investments, in ventures such as offices and recycling plants as well as shops, have increased sharply in recent years. Purchases of land and buildings reached almost £4bn in 2017-18 (see chart). The spree has been financed principally by borrowing from the Public Works Loan Board (PWLB), part of the Treasury established in 1793 to lend cheaply to local authorities. Figures just published show that councils owe the PWLB £75bn, up from £67bn 18 months ago. Total council borrowing exceeds £100bn, up from £92bn.

Worries are growing that not all these investments have been wise. In the past three years councils have bought £800m-worth of shopping centres alone, according to Knight Frank, a property company. Yet as councils have been piling into retail spaces, others have been sounding alarms about the sector. On February 21st a parliamentary committee warned that city centres could become “ghost towns” as shops shut and footfall declines. High-street chains like BHS have collapsed, while others have been closing branches. Next to Weston’s Sovereign centre, a branch of Marks & Spencer is due to close. The value of shopping centres is therefore highly precarious. CBRE, a property company, reports that in the third quarter of last year rents in malls fell by 1.7%, continuing a downward trend. On February 25th Hammerson, a big shopping-centre landlord, reported a loss of £267m in 2018, having made a profit of £413m the previous year. It now wants to divest itself of nearly £1bn worth of assets to balance the books. Earlier in February the Postings shopping centre in Kirkcaldy, Scotland, in which 14 of the 21 shops were empty, was sold for a derisory £310,000, having cost £4.3m to build in 1981. Jefferies, an investment bank, has warned that retail-property values could plunge by a further 20% this year. Nelson Blackley of Nottingham Business School says that a strong indicator of the lack of confidence in the sector is that last year saw the lowest number of sales of malls since the recession in 2008. Thus councils could be picking up some bargains, but they may also have drastically overpaid. The National Audit Office (NAO), an official watchdog, reported last month that consequently “risk profiles have increased in many local authorities” and that councils are making commercial investments that “carry a risk of failure or under-performance”. It added that even as councils have become more speculative in their commercial activities, their capacity to analyse risk has been eroded. Funds to support “governance” in councils fell by 34% in real terms between 2010-11 and 2017-18. Those councils with weaker governance tend to be the ones taking greater financial risks, the NAO said. The abolition in 2015 of the Audit Commission, which had kept tabs on councils’ activities, removed an important layer of oversight.

As councils take more risks to raise cash, there will inevitably be failures, warns Martin Reeves of the Society of Local Authority Chief Executives. “Even with the best due diligence, markets shift,” he says. And if shopping centres shut down, councils will also lose the business rates they pay, which are meant to be local authorities’ primary source of funding now that the central government grant is drying up. It may soon be time to commission a new show from Banksy. “Panicland”?