SMEs on a “cliff edge” as £900m local growth fund cut

The Government has announced that it is winding down its UK Shared Prosperity Fund (UK SPF), which has contributed £900m to local growth since 2022. 

The decision is already being criticised as councils warn it could push businesses to the “cliff edge,” arguing that the alternatives being put in place will not fill the gap. Indeed, the County Councils Network, whose members provide more than half of England’s jobs, businesses and Gross Value Added (GVA), is warning of a significant impact on training and business support. 

Hospitality businesses in particular are facing tough times with increased employment costs; business rate rises and the continuing bite of the Cost of Living crisis. For many, funding from local sources has been key to both establishing their business and keeping it going. This latest decision is being warned will hit local growth hubs hard. 

What is the UK Shared Prosperity Fund?

Set up to replace the old EU structural funds, the UK SPF was created to level “opportunity and prosperity and overcome deep-seated geographical inequalities that have held us back for too long,” said the Government. 

It added that the fund would “…reduce the levels of bureaucracy and funding spent on administration when compared with EU funds. It will enable truly local decision making and better target the priorities of places within the UK.”

The £2.6 billion fund was given directly to local authorities for them to distribute in three areas: communities and place, support for local businesses and people and skills.

What is it being replaced with?

The fund will be closed down from March 2026 and is being replaced with a new Local Growth Fund for areas with established mayors and the neighbourhood-level Pride in Place programme.

The Local Growth Fund is longstanding and was reviewed in July, with recommendations that a broader selection of government departments should contribute “to the pot”; and the emphasis should be shifted from “scrutiny to support”. 

The Pride in Place Programme was unveiled in November and sees funds sent to 250 places. Businesses can apply, but the criteria are being set at the local level, so they will vary; but the focus is on improving the local community. 

What are the concerns?

The County Councils Network argue that replacing the one single fund with two others has left some councils in limbo, and this will have an immediate impact on businesses. It also comes at a time when businesses are clamouring for the Government to step up to help improve access to private sources of funding.

Grant Thornton revealed in a survey of 800 businesses in the UK that 73% believe that the Government needs to do more on this. Key demands include enhancing tax incentives for private investors in high-growth sectors and implementing policies that incentivise private investment in local businesses.  

Private investment could prove a lifeline ,as when surveyed, nine in ten councils voiced concerns that their areas will not receive any money from the Local Growth Fund. On top of this, not one respondent agreed that the Government’s Pride in Place programme “was an adequate replacement for the UK SPF”. Indeed, 90% said that they would be unable to continue local business support services without adequate replacement funding, with SMEs set to lose out. 

Many of the areas that claim they will miss out are those that have elected officials but will not have a mayor in place until elections happen in 2028. Until then, they warn that growth hub programmes will be shut down with up to 200 job losses in one area alone. 

Which areas will be hardest hit?

In particular, the organisation argues that several areas, including large rural unitary councils such as Buckinghamshire, Shropshire and West Northamptonshire, alongside places like Devon, are set to receive nothing from both funding streams. 

It is the rural areas under these councils that will feel the loss most keenly, the Network argues. Cllr Steven Broadbent, Finance Spokesperson for the County Councils Network, said: “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 that are currently benefitting from the UK SPF need to reach out to their councils to find out what other funds they could benefit from; but this might also be the time to look at alternate funding sources.