The government has been warned that small businesses in deprived areas will go bust if the Phoenix Fund, which provides support to disadvantaged entrepreneurs, is shut down.
Ministers plan to close the fund, which has provided £42.5 million to firms over the last two and a half years, in 2006.
The fund currently finances the UK’s network of Community Development Finance Institutions (CDFIs), which help budding entrepreneurs from deprived areas who have difficulty securing funding.
The Community Development Finance Association (CDFA) warned that without the support of the Phoenix Fund, many small businesses would become insolvent.
Unveiling a new report on the impact of the Phoenix Fund, Sarah McGeehan, of the CDFA, said that the support was vital to many small firms.
“It provides 30 per cent of the capital that is lent or to be invested in these community businesses. With that gone, some of these businesses just won’t survive,” she said.
Bernie Morgan. Chief executive of the CDFA, urged the government to extend the fund beyond 2006.
“Cutting the support of the Phoenix Fund will kill off the chance of many small businesses in Britain’s most under-invested neighbourhoods getting access to the finance essential for their growth.
“Our vision at CDFA is to build a thriving CDFI sector able to offer financial services that stimulate economic activity in under-invested areas.
“The challenge for the government continues to be in supporting the creation of wealth within these communities with a stable and enabling environment,” he said.
