Estimates show that an estimated £1.03bn of grants were made fraudulently, but the BEIS report does not address the fraud issue.

Earlier this year, the Public Accounts Committee warned that local authorities should have made more extensive assurance checks on grant applications. It noted that ‘the number of new companies being registered in 2020–21 rose by more than 20% compared to any of the previous five years. Although BEIS indicated that disruption can also present opportunity, we feel around 170,000 new companies would certainly appear to be a warning sign warranting closer scrutiny’.

PAC criticised BEIS over the lack of scrutiny of new company formations, stating that the department ‘could not tell us whether it sought or received information from Companies House on company formation trends, and so this is unlikely to have featured in the department’s understanding of evolving fraud risks. Each new company could potentially apply for Covid-19 business support’.

Micro, small, and medium sized firms across different business sectors benefited from the local authority grants.

The data from the Department of Business (BEIS) shows over one-third of all available funding was allocated to the accommodation and food services sector which claimed £8.2bn, a part of the economy hit hardest by the pandemic. Businesses in this sector have also seen significant support from the government’s hospitality strategy, published in July 2021.

Firms operating in wholesale retail, arts and entertainment, recreation, and other services industries were also among the different business sectors to receive substantial help under the scheme.

Small businesses were also supported through initiatives including the government’s recovery loan scheme, which backed almost 19,000 firms with average support of £202,0000 each, as well as the increase in employment allowance, the 5p cut to fuel duty, and business rates relief for high street businesses.

Oliver Simms, manager, public sector audit & assurance for ICAEW, said: ‘The government priority at the start of the pandemic was to distribute money to businesses in need of support as quickly as possible and this came at an understandable trade off against pre-payment fraud controls.’

ICAEW said that the high levels of fraud and the variable quality and timeliness of information provided to BEIS supports ICAEW’s position that there is a need for greater investment in local authority finance teams.

It’s vital that, if government is to successfully partner with local authorities to deliver on its priorities.