Government claws back EU millions from Cornwall businesses

The Wheal Jane Group is one of the businesses affected

The government is demanding businesses repay millions of pounds of European grants, the BBC has learned.

The cash was handed out to businesses and public sector organisations to promote development.

Businesses told the BBC the Department for Communities and Local Government (DCLG) is demanding funds be returned due to EU rules not being followed.

The DCLG said the issue could affect businesses across the UK and it had to ensure funding was properly managed.

However affected organisations say the government is trying to retrospectively enforce new funding rules.

'Inappropriate expenditure'

The BBC understands the government is retrospectively applying criteria on points such as the transparency of bidding processes for contractors.

A DCLG spokesman refused to outline the specific issues being raised with businesses or the amounts involved.

He said: "From the outset every project agrees a funding contract which includes regular checks and if expenditure is found to have been inappropriate then the overall value of the award is reduced."

A spokesman for the EU commission said the rules "haven't changed in the past couple of months" but did not respond to questions regarding who had launched the attempts to retrieve the cash.

Companies raised the alarm in Cornwall which has received hundreds of millions of pounds in EU funding but firms across the country could be hit.

Sandra Rothwell, chief executive of the Cornwall and Isles of Scilly Local Enterprise Partnership, said she was "perplexed".

She said: "What has changed given that previous audits have given a clean bill of health?"

Bernard Ballard from the Wheal Jane Group, which has benefited from EU funding, said the attempts to claw back cash were "a terrific blow to confidence".

Neil Gallacher, BBC Spotlight's Business Correspondent

This has sent chills down the necks of business people who have built grant-aided projects in Cornwall.

I've spoken to one firm, who requested anonymity, who are being asked for the entirety of their European grant back running to several millions of pounds.

The most pressing question is whether the rules that the DCLG is now seeking to apply were in force at the time these projects were put together.

This could reopen an ancient debate: In a small business community like Cornwall, surrounded on three sides by water, is it realistic to have to demonstrate the same level of competition as you might in, say, Birmingham?

Clare Moody, Labour MEP for the South West, said: "This needs to be properly investigated - moving the goalposts on funding post application and huge unexpected recalls of funding are quite clearly unacceptable."

Steve Double, Conservative MP for St Austell and Newquay, said the clawback was "completely being driven by the EU Commission".

But Russell Dodge, managing director of Business Location Services in Truro which has helped businesses with EU grant funding, said enforcement and compliance was "being driven by the Department for Communities and Local Government".