The Government has created a £615m discretionary fund for councils to help small businesses that have fallen outside the scope of its existing coronavirus grants.

Councils had lobbied the Government over the number of businesses that were struggling to get support, including because they were tenants and therefore not directly liable for paying rates.

Firms will have to demonstrate a ‘significant drop in income' as a result of coronavirus in order to be eligible for the cash.

Local authorities will first be expected to use any ‘under-utilised' allocations from the original £12.3bn pledged by the Government after exhausting all efforts to get businesses that are eligible for the support grant to apply.

The Department for Business, Energy and Industrial Strategy has also confirmed that it will be accountable for any support grants paid out in error or due to fraud as long as local authorities have ‘done what is reasonable and practicable to have avoided this in the first place and then having exhausted all reasonable and practicable steps to recover any over-payments'.

Ministers hope that clarifying the position on financial accountability will help encourage councils to release further grant payments.

They had hoped that all the money would have been distributed by the end of last month and are keen for government cash to get out of the door but the last 20% is proving to be difficult for many councils.

Small business minister Paul Scully is understood to have made a number of calls to local authorities to find out the issues they are facing.

Local government secretary Robert Jenrick this week warned that delays to grants would lead to businesses going ‘to the wall'.

He added: ‘Overall, local councils have performed well in getting those grants out to the frontline, but I think that we will need to take further action against those councils that are somewhat less successful.'

Civil servants have previously raised concerns about the feasibility of the grant schemes ‘given the speed at which we are expecting local authorities to make payments, and the operational difficulties they will experience in trying to administer efficiently and error-free a new scheme during a pandemic'.