£1.7bn still to be distributed from Small Business Grant System: Should the government re-divert the funds?

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Business rates experts at Colliers International are urging the Government to revisit its grant scheme for businesses- set up to help with the financial impact of the COVID-19 pandemic and to consider re-deploying some of the funds to help those businesses- and the three million workers so far ‘excluded’ from receiving any Government financial help.

According to data just published by the Government, £1.7bn of the Small Business Grants Fund (SBGF) and Retail, Hospitality and Leisure Grants Fund (RHLGF) allocated to Local Authorities to pay to businesses has still not yet been distributed, despite the fund being set up 15 weeks ago on March 23rd.

Of the £12.33bn originally allocated some £10.65bn or just over 86% has been paid out, leaving 14% still undistributed to businesses.

In particular:

  • Tendring District Council in North East Essex has only paid out £32.6m or just 41% of its £80.27m allocation.
  • East Sussex Council and Bournemouth have only each paid out 60 and 62% of the grant monies they were allotted, (£60.7m out of £101.5m and £76.9m out of £128.8m, respectively).
  • And a total of 19 Local Authorities have paid out less than 75% of the grants they were allocated
  • By contrast at the other end of the scale Westminster Council has paid out more than its allocation, paying out £94m or 120% of its £78m allocation to businesses and the City of London has distributed 119% or £17.6m of its £14.74m allocated

John Webber, Head of Business Rates at Colliers International said: “I find it incredible that £1.7bn of the Government’s grant scheme has still not been distributed to businesses despite the scheme being set up four and a half months ago. One can conclude that either certain Local Authorities have been too short staffed or particularly inefficient in handing out much needed grants- or- and what may be more likely, State Aid rules are stopping some businesses who have multiple properties from accessing all the grants. This might particularly apply to multiple store retailers. If this is the case then there will still be some funds going begging.”

Webber points out that the way the grants were allocated in the first place, based purely on business rates liability has thrown up many inefficiencies and inconsistencies in the system, particularly when comparing the small size of grant allocation to places like the City of London which received only a £14.74m allocation, despite the recognised large number of businesses based there. This was mainly because the grants were based on business rates liabilities – and many small businesses were paying higher rents and rates in the capital than elsewhere and were therefore unable to qualify for the grant.

The government’s additionally £617m discretionary grant, introduced at the beginning of May, aimed at small businesses with ongoing fixed property-related costs, has also not plugged the gap as much as expected. It appears the pot for this fund was too small to help all the businesses that could qualify. Only an extra 5% of grant was allocated to each individual local authority to use as it thought fit. This did not take into account the actual number of businesses in a borough that might be eligible for such relief. For example, the City of London with an initial grant of £14.74m, now has an extra 5% or £737,000 to allocate. At £10k per business to distribute this means it could only distribute to 73 businesses- so even more businesses are falling within the cracks and not receiving vital funds.

Webber continued: “We have a bizarre scenario where on one hand we have three million workers and businesses ‘excluded’ from receiving Government help in terms of grants, or the discretionary fund, many of which may soon be pulling the plug on their companies.

And on the other hand, we have £1.7bn of grant money sitting there and not claimed after four and a half months. Perhaps it would be sensible to conclude that if after 15 weeks 40% of businesses in places like Bournemouth still have not claimed funds, it probably means the grant allocated is very unlikely to be used.

The Government might consider clawing back any grant monies not distributed by certain local authorities to use in those areas where businesses do need greater support.

“The current set up is just not working. There are hundreds of businesses that need grant help which are still being denied it- in the City and in other regional centres of the UK. Small businesses are the lifeblood of the economy and we urge the Government to re-look at the way it provides support to those ‘excluded’- or ‘forgotten’. Properly utilising £1.7bn that nobody seems to be claiming would certainly seem to be a good start.”

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