Government can build resilience against future national emergencies by applying lessons from its experience of paying £22.6bn in grants to businesses amid the COVID-19 pandemic, a new National Audit Office (NAO) report says.

The report, COVID-19 business grant schemes, records the pace at which 4.5 million payments were issued to firms via eight schemes from March 2020 to March 2022. Working under significant pressure, the former Department for Business, Energy and Industrial Strategy (BEIS) and councils successfully established the schemes and quickly distributed grants to businesses in England to soften the impact of restrictions.

HM Treasury (HMT) asked BEIS in late February 2020 to consider how a grant scheme might be delivered. The first scheme was announced at the Budget on 11 March with a second announced on 17 March.  No contingency plans existed between central and local government for supporting firms during a national emergency. Local authorities were not notified of the new schemes until they were publicly announced by HMT. This created significant practical challenges as councils scrambled to understand scheme requirements and answer questions from businesses.

The initial grant schemes, where BEIS did not require pre-payment checks, contributed the overwhelming majority of the estimated £1.1bn losses from error and fraud across all of the schemes. These losses amounted to just under 5% of the value of grants paid to businesses. BEIS estimated that error and fraud under later schemes was significantly lower. By mid-February 2023, the new Department for Business and Trade (DBT) reported £11.4m of these losses had been recovered.

BEIS learned lessons from the initial response in 2020.  It established strengthened governance arrangements and also mandated pre-payment checks which helped to greatly reduce the level of losses in later schemes.

Ipsos is currently carrying out a BEIS-commissioned evaluation of the grant schemes to assess their economic impact and value for money. This work is more challenging than it would have been had evaluation been built in from the start. DBT, which is now responsible for these schemes, expects a draft final report in late spring 2023 and is also examining the impact of its other COVID-19 interventions, including business loans. HMT has no parallel plans to evaluate the overall impact of government support to businesses.

“BEIS and local government deserve credit for working quickly to set up and distribute grants to businesses. Early schemes lost significant sums to error and fraud, but BEIS addressed this in later iterations. The government does not yet know the impact of these grants - in terms of maintaining jobs or how much support might have been given to businesses which did not need it. Without such an assessment, an overall judgement about the value for money of the schemes remains open.

“The government’s experience of working at speed with local authorities to channel financial support during the pandemic offers important lessons should similar crises occur. The new Department for Business and Trade can now use these lessons to improve contingency planning and to build government resilience for responding to future national emergencies.”

Gareth Davies, head of the NAO

Read the full report

COVID-19 business grant schemes

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