POLITICAL and business leaders have raised the alarm after Government hints that the flagship Regional Growth fund could be reduced or axed.

Business Secretary Sajid Javid has ordered a rethink of industrial policy amid a shift towards the Thatcherite approach of lighter regulation and cutting red tape, it was reported.

One insider told the Financial Times: “Sajid is taking a fundamental look at everything, including asking why the department is giving money to companies that already have a lot of money.”

The comment raised doubts over the future of the flagship Regional Growth Fund (RGF), the only sizeable pot of money to persuade firms to set up in the North of England.

The RGF has already been whittled back from around £1bn a year to just £300m – ahead of huge cuts at the department for business, innovation and skills (BIS), which funds it.

Yesterday (Monday, June 8), a BIS spokesman told The Northern Echo that a further £264m would be available in 2016-17, but there was no commitment beyond that date.

He added: “The Regional Growth Fund is being looked at, in the same way as all kinds of programmes across Government. It all depends on what the Treasury decides to do.”

One industrialist said BIS officials had told business leaders not to use the words “industrial policy”, which Mr Javid views as a “Liberal Democrat phrase”.

Tom Blenkinsop, Labour MP for Middlesbrough South and Cleveland East, said: “This is worrying for the North-East and for all regions

“The Regional Growth Fund is at least one source of finance that everyone can dip into – now maybe we won’t even have that one source of finance?

“The LEPs [local enterprise partnerships] don’t have the money and we are not part of the Northern Powerhouse, so what will we get? We need reassurances.”

And Ross Smith, director of policy at the North-East Chamber of Commerce (NECC), said that, despite “mistakes” with the RGF, it was still needed to support job-creating projects.

He said: “We want to see a commitment to a stable fund over the lifetime of this Parliament that will be accessible to North-East SMEs [small and medium-sized enterprises].”

The RGF has been dogged by criticism of long delays and because it is difficult for smaller firms to obtain grants.

Nevertheless, with the abolition of the Grants for Business Investment (GBI) scheme for assisted areas, it became almost the only source of investment help.

Last year, BIS said £310m had been allocated to 98 projects in the North-East, which were expected to create, or safeguard, 58,000 jobs.

Mr Blenkinsop said Mr Javid’s review also cast fresh doubt on a promised compensation scheme for Teesside's heavy industries, after green taxes on steel producers and chemical firms.