Labour warns over North-South split on funding for new businesses as firms are on the brink of collapse without more government support

A GULF in investment between the North and South of England is heightening a regional economic divide, Labour has warned, as new data suggests nearly 600,000 firms are at risk of collapsing due to a cash crisis caused by the coronavirus pandemic.

Shadow Business Secretary Ed Miliband, the Labour MP for Doncaster North, has accused the Government of “reinforcing economic imbalances” in the funding of start-up businesses amid the coronavirus pandemic. (Picture: Getty Images).

Analysis published by the Labour Party last night has revealed that London and the South-East have received five times more government funding for start-ups than the North and Midlands.

And in a separate study released today, researchers have claimed that as many as nine million jobs could be placed under threat if the Government does not extend its support measures for hundreds of thousands of companies in the UK.

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Shadow Business Secretary Ed Miliband accused the Government of “reinforcing economic imbalances” in the start-up funding.

The Labour MP for Doncaster North said: “While the Government talks about backing the North and Midlands, the reality is starkly different.

“By investing much more heavily in start-ups in the South and squeezing out other parts of the country, they will be simply reinforcing economic imbalances.

“Ministers have already hurt hard-working entrepreneurs during this crisis by excluding them from support. Instead of hot air and rhetoric, it is time for Ministers to deliver.”

The data from Labour has shown that businesses in the South-East and London in total received more than £700m in funding, while those in the North, Yorkshire and Midlands received £140m.

Meanwhile, the average award for a start-up in Yorkshire, the North-East, the North-West and the West Midlands was lower than that for a business in London or the South-East.

Just over two-thirds of applications for the Future Fund - launched to help protect the UK’s innovation sector during the coronavirus crisis - were from London and the South-East.

Henri Murison, the director of the Northern Powerhouse Partnership, said: “We’ll be calling on all political parties to put forward considered, coherent proposals to close the North-South divide as we tackle the immediate economic challenges.

"Government intervention must be maximised to get the biggest bang for our buck in the short and long-term.”

The separate study published today by the Institute for Public Policy Research (IPPR) revealed that one in three businesses had less than three months of cash reserves - considered the danger point for firms - in the four months to the end of January.

This has risen from a quarter of firms previously, with small companies and those in the battered hospitality sector suffering the most as England’s third national lockdown wreaks havoc.

Carsten Jung, the IPPR’s senior economist, said: “This is a moment of great peril for more than half-a-million UK employers as their cash reserves run perilously low and their businesses hang on by a thread. More firms are already at risk than at any time during the pandemic began.”

The Government stressed it has provided an “unprecedented” £280bn of support for businesses affected by Covid-19 across the UK.

A spokesman said: “The Future Fund uses a set of standard terms with published eligibility criteria, independent of Ministers. This a clear, efficient way to make funding available as widely and as possible, irrespective of location.”

“In addition to the Future Fund, the British Business Bank has provided nearly half-a-billion pounds to high-growth firms outside of London.”