LONDON (WHN) – A £900 million government fund, designed to bolster local economies and support small and medium-sized enterprises (SMEs), is being phased out, sparking fears of significant disruption for businesses already navigating a tough economic climate.
The UK Shared Prosperity Fund (UK SPF), launched in 2022 with a £2.6 billion total allocation, is set to close from March 2026. This decision, according to critical voices, risks pushing businesses onto a financial “cliff edge,” as the replacement schemes are seen as inadequate substitutes.
The County Councils Network, representing local authorities responsible for over half of England’s jobs, businesses, and Gross Value Added (GVA), has issued stern warnings. Their members report a substantial impact on vital training programs and business support services. For many SMEs, particularly in sectors like hospitality facing rising employment costs and business rates, this local funding has been a lifeline, instrumental in both startup and ongoing operations.
The UK SPF was established to mirror and replace EU structural funds, with the stated aim of leveling opportunity, prosperity, and addressing deep-seated geographical inequalities. The government positioned it as a more streamlined, locally-driven alternative, promising reduced bureaucracy and more targeted allocation compared to its predecessor.
The fund operated across three key areas: communities and place, support for local businesses, and people and skills. Local authorities received direct allocations to distribute, enabling them to tailor support to their specific needs.
However, the transition plan introduces two new initiatives: the Local Growth Fund and the neighbourhood-level Pride in Place programme. The Local Growth Fund, a longstanding scheme, was reviewed in July with recommendations to broaden departmental contributions and shift focus from scrutiny to support. The Pride in Place Programme, unveiled in November, targets 250 locations, with businesses able to apply, though criteria vary significantly as they are set at the local level, with an emphasis on community improvement.
The County Councils Network contends that swapping a single, comprehensive fund for two distinct programs has left many local authorities in a state of uncertainty. This, they argue, will have an immediate detrimental effect on businesses. This comes at a time when businesses are actively seeking more government intervention to improve access to private funding.
A survey by Grant Thornton of 800 UK businesses revealed that 73% believe the government needs to increase its efforts in this area. Key demands include enhanced tax incentives for private investors in high-growth sectors and policies that actively encourage private investment in local enterprises.
The prospect of private investment looms large, yet councils express significant reservations. Nine in ten councils surveyed voiced concerns that their areas might not receive any funding from the new Local Growth Fund. Furthermore, not a single respondent deemed the Pride in Place programme an adequate replacement for the UK SPF. A staggering 90% stated they would be unable to sustain local business support services without sufficient replacement funding, with SMEs poised to suffer the most significant losses.
Areas that stand to lose out include those with elected officials but without a directly elected mayor until 2028. These regions face the immediate prospect of growth hub programs being shuttered, potentially leading to substantial job losses. One area alone anticipates up to 200 job cuts.
The County Councils Network specifically highlights large rural unitary councils such as Buckinghamshire, Shropshire, and West Northamptonshire, along with areas like Devon, as likely to receive no support from either the Local Growth Fund or the Pride in Place programme.
Rural communities within these council areas are expected to feel the impact most acutely. Councillor Steven Broadbent, Finance Spokesperson for the County Councils Network, stated, “At a time when the government has made economic growth its key priority, it is concerning that the government’s actions suggest it believes growth can only happen in urban and city areas, creating a lopsided system of ‘have and have nots’.”
Businesses currently benefiting from the UK SPF are advised to engage with their local councils to explore alternative funding streams. This situation also underscores the urgency for SMEs to actively seek out and investigate diverse funding sources beyond government grants.