Around 10,000 pubs risk permanent closure unless the government ring-fences £1b of grant scheme funds, claims the British Beer & Pub Association (BBPA).
BBPA has backed calls from the Local Government Association to ring-fence the unclaimed funds from schemes that would otherwise be clawed back by government.
It says the funding is desperately needed to continue to help support pubs and other businesses severely affected by the pandemic and who were not eligible for the Retail, Hospitality and Leisure Business Grants Fund because their business rates were too high.
According to the Local Government Association, the government has written to local councils confirming that Small Business Grants Fund, Retail, Hospitality and Leisure Business Grants Fund and the Discretionary Grants Fund schemes will close on 28 August.
It is urging that councils be allowed to redistribute unspent resources to reinvest and support businesses and local economies through this crisis.
BBPA chief executive Emma McClarkin said even though the sector was allowed to reopen in England on 4 July, many pubs are still waiting for financial support and, as a result, are struggling to survive.
"The government should be focused on supporting business like pubs that can help the economies of local communities grow, not withdrawing vital funding at a time businesses across the UK need it most, she said.
"Rather than clawing back this money, it's a no-brainer to use it to help those businesses that have either fallen through the cracks or are continuing to struggle.
"Our sector may have reopened, but it is far from out the woods yet. Our pubs still need all the support they can get and many are still waiting on it, so withdrawing £1b in possible funding is short-sighted to say the least."
In April the BBPA first identified many parts of the country where pub businesses were yet to receive grant funding from local authorities to help them survive the lockdown.
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