£1 billion loss to local economies if COVID-19 grant schemes closed

“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."

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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, new analysis by the Local Government Association shows today.

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 August 28. Any unclaimed funds will need to be returned to the Government.

The LGA said these schemes have seen councils provide billions in vital grants to businesses struggling with the economic shock caused by the pandemic.

It 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. Many set up dedicated teams and redeployed staff so they could process applications as quickly as possible.

They have used websites, social media and local media to try and reach the businesses which they do not hold details for – because they receive rates relief or discounts - but are eligible for funding. It continues take time to get that information back from some eligible businesses.

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.

The LGA said the Government deadline to shut this discretionary scheme will not allow enough time for the remaining grant to be paid out.

Cllr 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.”

Tej Parikh, Chief Economist at the Institute of Directors, said:

"For many small businesses, the fight is far from over. 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."

Notes to editors

  1. The LGA estimates that £1.1 billion could be clawed back from councils if the schemes close on August 28. This is based on councils increasing their payments by proportionally as much between now and then as they did from the period from 22 June to now and paying out all the discretionary grant. 
  2. Under the Small Business Grants Fund (SBGF), most businesses in England that are in receipt of either small business rate relief (SBRR) or rural rate relief (RRR) are eligible for a grant payment of £10,000. Under the Retail, Hospitality and Leisure Grant Fund (RHLGF), businesses in receipt of the expanded retail discount have been eligible for a cash grant of £10,000 per property for properties with a rateable value of £15,000 or less, and £25,000 per property for properties with a rateable value between £15,001 and £51,000. Councils were allocated a share of more than £12 billion to fund these grants.
  3. At the start of May, the Government announced the Local Authority Discretionary Grants Fund. It has allowed councils to award additional grants (£25,000, £10,000 or any amount under £10,000) to businesses ineligible for the main schemes. Total expenditure has been capped at 5 per cent of the amount allocated to the main schemes making the scheme worth up to £617 million across England.