More than half of councils fear Brexit will harm international trade with local firms, adding to ongoing funding pressures as reduced income from business rates could affect the provision of vital services, a report has found.

A PwC survey of local authority bosses revealed 55% believe some councils will fail to deliver essential services to residents over the next year, while half of local authorities expect government funding to decline post-Brexit.

Local councils are warning that Brexit could deal a blow to local exports, and reduce foreign direct investment – both factors which help to drive local economic growth.

Overall, 55% of local councils also expect businesses in their community will see less trade overseas, a drop which would directly hit income from business rates – a tax charged on non-domestic properties such as shops and pubs – and trigger a knock-on effect on funding for services.

As a result, around one in five (18%) councils are planning trips abroad to attract overseas investment and develop trading links. 

Just 43% of councils in the UK say they feel prepared for potential Brexit outcomes.

It comes as the damaging effects of the government’s austerity policies continue to chip away at the capacity of local councils.

Funding for English councils fell by 21% between 2009-10 and 2017-18, the Institute for Fiscal Studies found in May.

Spending on planning and housing services dropped by more than 50% while leisure and transport departments saw cuts of more than 40%.

Earlier research from PwC suggests rising costs – particularly around social care – and increased demand for services hitting councils across England could trigger a need for £51.8bn in extra funding by 2025.

The latest findings show that more than three in four consumers said they or their family has been directly hit by austerity.

Meanwhile, the proportion of councils confident that they can make savings in the next year without impacting services has dropped from 72% in 2018, to 53%. The figure is down almost half from 2012, when 94% of councils felt they could make the necessary savings.

Jonathan House, PwC health industries and local government advisory leader, said: “For many local government leaders, Brexit is the elephant in the council chamber. 

“And, while the public focus is on Westminster and leadership politics, the most significant impact of Brexit negotiations will come at local council level, where concerns over FDI and local growth leadership may have a significant impact on provision of public services.”

He added: “While councils have the desire and ambition to work collaboratively with other public services, their goals are frustrated by a continued focus on short term financial demands and the day-to-day pressures of maintaining service delivery.”

More than 100 local authority chief executives, finance directors and elected council leaders across the UK were polled by the professional services firm. 

A parallel survey asked 2,000 UK consumers about the performance of their local authority. 

With the Tory leadership race ongoing, there has been increasing talk of the prospect of a no-deal Brexit come the Halloween deadline.

On Monday, Jeremy Hunt said he would decide at the end of September whether to continue Brexit talks with Brussels or go for a no-deal withdrawal option if he become PM.

Boris Johnson stressed during a campaign stop on the same day: “It is absolutely vital that we get ready for a no-deal Brexit but I want to stress again and again – I don’t believe that that is where we’re going to end up.”