Local economies facing £1 billion loss, warn councils

The Local Government Association has warned that local economies risk missing out on more than £1 billion in emergency coronavirus funding if the government goes ahead with plans to close business support schemes this month.

The government has written to councils to say it will shut three funding schemes – the Small Business Grants Fund, Retail, Hospitality and Leisure Business Grants Fund and the Discretionary Grants Fund – on 28 August. Upon their closure, any unclaimed funds will need to be returned to the government.

These schemes have seen councils provide billions in vital grants to businesses struggling with the economic shock caused by the pandemic. The LGA estimates there could be a total underspend of £1.37 billion if the schemes close this month.

It is urging the government to keep the Discretionary Grants Fund scheme open so councils can try and ensure as many businesses benefit as possible and redistribute any unspent resources from the other two schemes back to councils to reinvest in supporting businesses and local economies through this crisis.

Councils have worked at pace to distribute almost £11 billion to almost 880,000 eligible small businesses through the Small Business Grants Fund and Retail, Hospitality and Leisure Business Grants Fund since March. Other businesses which fell outside the scope of these original schemes – such as bed and breakfasts, market traders and charities – have also been given cash grants by councils as part of the Discretionary Grants Fund, introduced in May.

Richard Watts, Chair of the LGA’s Resources Board, 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.”