The UK could lose out on nearly £1bn of EU funding if it does not speed up the way the money is allocated to local projects, councils have warned.
The Local Government Association says local areas face “huge” shortfalls as the money is not getting through.
It says only 48% of the £3.1bn due to the UK has been allocated – five years into the seven-year spending period.
The Department for Work and Pensions told the Financial Times the money could be spent after 2020.
The LGA, which represents English and Welsh councils and other authorities, has urged the government to ensure that all European Social Fund money – aimed at supporting employment, skills and training in member states – is allocated before the period ends in 2020.
It argues that the ESF is a “lifeline” for local areas, but says “centralised control” over the money from the Department for Work and Pensions was making it difficult for local areas to access funding and it says there is a “lack of capacity” in Whitehall to ensure ESF money is spent quickly.
Five years into the 2014-20 spending period, it says only 48% of funding has been allocated to projects and that the rate at which the government is allocating the money appears to be slowing down.
With £1.5bn allocated, it says there is still £1.6bn left to spend and, at the current pace, £914.5m will not be spent in time and risks being “sent back to Brussels”.
“The current situation with the European Social Fund is leaving local areas facing huge financial shortfalls as a result of a lack of investment,” said Kevin Bentley, chairman of the LGA’s Brexit taskforce.
“This funding has been used by local areas to create jobs, support small and medium enterprises, deliver skills training and invest in critical transport and digital infrastructure and boost inclusive growth across the country.
“To help ensure we have an economy fit for the future, we urge the government to act urgently to ensure that local communities are getting the investment they desperately need, as well as learn from this experience in developing the UK Shared Prosperity Fund [the post-Brexit replacement for EU funding].
“Without action there is a risk that nearly a billion of pounds of investment into our communities will be lost and local areas and economies will be denied desperately needed funding.”
A spokeswoman for the DWP told the Financial Times: “There is an agreement that funding can continue beyond 2020 as long as the application is received before then.
“There is a huge amount of interest in the European Social Fund and there are more and more applications coming in. There is no issue with the ability of the department to process those applications.”