London businesses losing out on millions in virus support because of ‘simplistic’ grants formula



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entral London’s battered economy is losing out on millions of pounds in desperately-needed support because of the way grants are being awarded, the Standard reveals today.

Councils are being allocated funds to help hard-hit firms survive through lockdown through the £1.1 billion Additional Restrictions Grant.

However, the level of funding is based on a formula of £20 per head of the local population — rather than the number of businesses in an area. 

The capital has a high number of firms compared with many other parts of the country, so average funding per business is as low as £8.09 in the City of London, compared with an average of £485.85 for the UK.

Six of the ten areas receiving the lowest sums on average per business are in the capital, according to an analysis by the office of Nickie Aiken, Conservative MP for Cities of London and Westminster.

Westminster is second lowest at £100.9 per business, followed by Camden on £163.63, Kensington & Chelsea 5th lowest on £228.09, Islington 7th on £229.01 and Hackney 9th on £251.67.

This compares to Blaenau Gwent in Wales getting £1,140.60 on average per business, Inverclyde in Scotland £960.49, and Sunderland £953.49.

Ms Aiken told The Standard: “It beggars belief that when central London collects billions of pounds in business rates for the Treasury that this new discretionary grant offers just £8 per business in the City and £100 in Westminster.

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“There has got to be a rethink, particularly as the capital has been so badly hit by the pandemic.”

Westminster City Council leader Rachael Robathan has written to Communities Secretary Robert Jenrick to warn that the Additional Restrictions Grant will not go far enough in the fight to save the £54 billion West End economy.

In her letter, she stressed that Westminster has a residential population of 261,317, similar to Stoke-on-Trent so would be getting a similar sum even through there were nearly ten times as many businesses in the London borough.

“This overly simplistic funding formula will severely undermine the support we are able to provide to the city’s businesses,” she added.

London’s average per business is put at £337.36, compared to £438.85 for the South East, £459.56 for the East, £476.27 for the South West, £525.60 for the East Midlands, £534.83 for the West Midlands, £549.79 for the North West, £581.51 for Yorkshire and the Humber, £595.70 for Wales, £614.91 for Scotland, and £747.20 for the North East.

The estimated total for Westminster, based on mid-2019 population ONS figures, will be just over £5 million and a paltry sum of around £200,000 for the City of London.

If it was based on business rates paid, Westminster would be getting a staggering £99 million, according to calculations by town hall chiefs.

The fund is allocated for businesses that can stay open but are struggling including food shops, newsagents, off licenses, pharmacies, DIY stores, garages, bike shops, taxi or vehicle hire firms, laundrettes, dry cleaners, vets, pet shops, and garden centres.  

Many areas with large private sectors are losing out, according to the analysis, particularly those with smaller populations like the City of London, while those dependent on the state sector and with fewer private businesses are doing proportionately better, especially if they have got large populations.

Ms Aiken has raised London’s situation with business minister Nadhim Zahawi in the Commons.

He insisted: “Overall, there is a strong positive correlation between business count and population. As a result, we see a fairly equal distribution of Additional Restrictions Grant value per business under the proposed allocation method.

“The Additional Restrictions Grant is one of several grant funds being made available to local authorities to support businesses that are either being asked to close or have had their trade affected as restrictions are put in place to tackle Covid-19 and save lives. All businesses required to close will receive grants of up to £3,000 per four-week period.”

A business department spokesman added: “The Government has supported businesses right across the UK, including those in London, where by the end of the month we will have provided councils with the largest amount of funding of any region in England – over £370 million.  

“This latest grant funding sits alongside a wide ranging economic support package, including extending the furlough scheme and reducing VAT for businesses in many sectors.”