Councils that fail to innovate and adapt to the tough funding climate will face a ‘slow and painful demise’ over the next five years, a new report has warned.

Research by Grant Thornton UK LLP and the University of Birmingham’s Institute for Local Government Studies (INLOGOV) suggests local authorities will need to make fundamental changes to survive.

Their report predicts six scenarios for councils in 2020 – all shaped by their response to austerity and rising demand.

‘Adaptive innovation’ sees councils redefine their role and exercise influence through partnership with other authorities while the self explanatory ‘running to stand still’ covers those who are led and managed well enough to steady the ship.

Councils that live a hand to mouth existence through a short-term view are defined as ‘nostril above the waterline’ and ‘wither on the vine’ accounts for local authorities that resign themselves to running the bare minimum statutory services as they move from ‘action to reaction’.

Those dubbed ‘just local administration’ have lost the capacity to deliver local services either because they have relinquished control or had them taken away. The final scenario, ‘imposed disruption’, accounts for councils where external intervention is eventually required.

‘The report highlights both the risks to local government of incremental decline and the opportunities which could come at this pivotal moment through active leadership, innovation and above all, collaboration,’ said Catherine Staite, director at INLOGOV.

‘Collaboration requires maturity and a focus on better outcomes rather than on structures and systems. Local government will need to be able to speak to central government coherently and convincingly before there is any hope of them letting go.’

She added: ‘The most forward looking local authorities are demonstrating just how much can be achieved, even in a time of great austerity. It’s important for the future of local government and the interests of the people we all serve that the rest catch up with the best – and quickly.’

Paul Dossett, partner and head of local government at Grant Thornton, said financial and operational challenges will ‘magnify exponentially over next 10 years’ and a ‘radical change’ is necessary if they are to ‘remain relevant’.

‘This can only be achieved through open, honest and collaborative dialogue between policy makers at all levels of government. In our view this must come with significantly greater financial devolution and tax raising powers, in order for the local authority of the 2020s to have any meaningful purpose.’