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Councils across England failed to spend millions of pounds earmarked to help struggling businesses recover from the Covid-19 pandemic.

An investigation by Oxfordshire-based chartered surveyors Bankier Sloan and RN has revealed that more than £175m in grants, handed to local councils under the Additional Restrictions Grants (ARG) scheme, was not allocated to local businesses.

Under the ARG scheme, which was formalised when national lockdown restrictions were reintroduced on 31 October 2020, an initial allocation was followed by three top-up grants. The final top-up grant was announced in December 2021. Councils were then written to in January with an instruction that cash unallocated by 31 March 2022 would be recovered to central government.

Bankier Sloan owner Ian Sloan told RN: “Many grants were aimed at helping retailers. Some of the under-distributions are surely unforgivable given that local retailers will have been struggling for two years.”

While the scheme’s administration fell to local councils, who set their own eligibility criteria, guidance was provided by the Department of Business, Energy and Industrial Strategy (BEIS).

The first three tranches of funding were directed towards businesses with a rateable value. However, the last £102m in grants was open to those mainly with no rateable value, such as market stalls or mobile businesses such as food vans and taxis.

According to figures published by the government this April, 167 councils spent at least 98% of the funds, with several overspending. Forty-five councils spent between 90-98%. Meanwhile, 34 councils spent between 80-90%, 12 spent between 70-80%, one spent 63% and another allocated just 34%. RN did not include combined authorities in its investigation due to these being grouped regionally rather than on an individual basis.

Waverley Council in Surrey confirmed it had unallocated funds of more than £1m. It told RN that despite widespread promotion, it did not receive the level of interest for the final tranche of funding as in previous lockdowns and, as a result, allocated none of that £365,000 to firms.

In particular, it claimed funding allocations were “based on head of population rather than number of businesses in each area”.

However, government guidance stated that while the first two allocations were calculated on a per-head basis, the last two top-ups were made on a per-business calculation.

A spokesperson added: “Waverley asked the government a number of times to remove the cliff-edge deadline of 31 March 2022. The government did not allow this flexibility.”

Chelmsford Council, which recorded an underspend of just under £1m, also said it did not receive sufficient applications for the final grant. “It came with explicit government instructions that it was not to be used for wider business support measures or as an income replacement fund,” a spokesperson said.

Meanwhile, Horsham Council recorded an underspend of £624,000. It followed guidelines agreed between five West Sussex Councils. However, the remaining four achieved a spend of between 96% and 100% compared to Horsham’s 89%. It also cited the cutoff date as an obstacle.

Southampton Council recorded an under-allocation of just under £1m, saying it did not receive enough eligible applications in early 2022. It said it reviewed its ARG policy regularly and aligned it to “local need”.

“ARG was also used to supplement government schemes such as the Omicron Hospitality and Leisure Grant, where local intelligence determined additional need or was used to target other businesses not covered by parallel schemes,” a spokesperson said.

The Federation of Small Business chair Martin McTague said the government should be working with local authorities to allocate surplus monies.

“Small companies have emerged from the pandemic to face record-high input costs, supply-chain disruption, surging energy bills, new trade paperwork, travel disruption, the return of business rates, labour shortages, the biggest tax burden since Atlee and mounting debt.

“Central government shouldn’t be clawing back grant funds, which are needed more than ever. Instead, it should be working with local authorities that have struggled with allocation to reach firms most in need,” he said.

BEIS confirmed that the recovery of funds is now underway. A spokesperson said: “We repeatedly urged councils to deliver grants as quickly as possible to support businesses and protect jobs.

“Taxpayers rightly expect any unused funds to be returned for other priority projects.

“We have backed businesses throughout the past few years with a package of support worth around £400bn. We continue to stand behind businesses through cutting fuel duty, raising the Employment Allowance, Help to Grow schemes and more.”

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