Local economies could miss out on £1bn in emergency coronavirus funding if government stops support schemes, councils warn

Local Government Association urges ministers to recycle any leftover funds into small business support

Local economies risk missing out on more than £1 billion in emergency Covid-19 funding if the Government goes ahead with plans to close business support schemes this month, councils have warned.

Town halls across England have distributed around £11bn in cash grants to almost 880,000 small businesses under three government schemes - the Small Business Grants Fund, the Retail Hospitality and Leisure Business Grants Fund and the Discretionary Grants Fund – introduced since the start of lockdown in March.

But the Local Government Association has estimated that there could be a total underspend of £1.37bn if the schemes are wound up as planned on 28 August, when any unclaimed funds will have to be returned to the government. It called for the leftover funds instead to be reinvested in support for local economies battered by coronavirus.

And the Institute for Directors said it would be “deeply disappointing” if the support was lost, at a time when many small businesses are far from returning to normal pre-coronavirus levels of operation.

"For many small businesses, the fight is far from over,” said IoD chief economist Tej Parikh. “It would be deeply disappointing if this support was withdrawn before time.

"Demand for the discretionary fund shows that many businesses have fallen through the cracks of the main schemes.

"With reopening and adjustment costs ahead, money will be tight for small businesses. Councils have been working to get the money to the front line and should be given the resources to kickstart local business recoveries across the country."

The Small Business Grants Fund, launched by chancellor Rishi Sunak in March, entitled small businesses in England to a one-off grant payment distributed by their local council, while the Retail, Hospitality and Leisure Grant Fund delivered support to the sector in the shape of one-off grants of up to £25,000 for each venue they operate. Councils across the country were allocated a total of £12bn to share out.

From the start of May, the Local Authority Discretionary Grants Fund allowed councils to award additional grants of up to £25,000 to businesses ineligible for the main schemes – such as bed and breakfasts, market traders and charities – with a cap of a total £617 million across England.

The LGA said town halls have set up dedicated teams to find eligible businesses and process grants as quickly as possible, but warned that the government deadline to shut this discretionary scheme will not allow enough time for the remaining grant to be paid out.

The chair of the LGA’s resources board, Richard Watts, said: “Councils have given out almost £11 billion in cash grants to businesses and worked hard to set up discretionary schemes to help support as many more as possible.

“It was a huge task to set up these schemes from scratch and the funding has been a lifeline to struggling businesses worried about the future.

“Shutting the discretionary scheme would be a mistake by the government at this time. Councils need more time and flexibility to ensure as many businesses can benefit from this funding.

“The Government also needs to commit to redistributing any unspent resources from the original schemes, including any clawed back, to councils to be spent on local efforts to help further support businesses and reboot local economies.”