Up to £1bn of European funding earmarked for English regions could go unclaimed over the next 18 months, according to the Local Government Association (LGA).
The LGA said that councils in England are entitled to approximately £1bn of European Regional Development Fund (ERDF) cash before the end of 2013, but it could go unclaimed because it needs to be match funded from other sources.
It added that more than two-thirds of councils are concerned that there is not enough funding available to match-fund the remaining cash and accused Whitehall of failing to help authorities unlock the money.
The LGA also accused the Treasury of being willing to give back the £1bn to the EU in exchange for an additional £670m as part of the UK’s rebate.
"This funding from Brussels is worth over £2bn for local areas once the matched funding is taken into account. Losing this source of income could be devastating for local economic growth," said David Sparks, vice-chairman of the LGA.
"Furthermore, it's not economic sense to abandon this cash for a lesser amount in return. Town hall leaders are urging the Treasury to think again, and consider what is necessary to ensure every penny from ERDF is invested in vital projects for growth."
However, local government minister Grant Shapps said the LGA claims were "factually incorrect and simply wrong". He added: "The programme is on course and on track, with 93 per cent of the proposed funds already committed or earmarked with more than 18 months to go until the 2013 deadline."
