Lincolnshire County Council will be the first authority in the UK to dip into a £52.6 million financial volatility reserve in order to support local businesses.

The authority's executive on Tuesday agreed to put aside £12 million from the reserve for local businesses facing difficulties in the COVID-19 pandemic, alongside another £200,000 for an emergency flood response scheme.

A further £10 million will also be taken from the council's capital programme to help repair rural roads.

The £12 million business funding breaks down into:

£7m grants for business not receiving government help whatsoever — including businesses started during the pandemic and those who have taken bounce-back loans from the government

£1m for vouchers of £1,000 to help businesses get onto digital platforms — e-commerce, contactless payment and websites

£1.5m for village businesses and local initiatives — £3-25,000 grants covering 75% diversification funds adapting to COVID-19/Brexit challenges

£2.5m for investment funds for rapid growth — mainly for young businesses with "great ideas" (grants between £25-75,000)

Executive member for economic development, Councillor Colin Davie said there were 43,0000 small business in the county, who "are the backbone of our economy".

"They are the best of our county and they represent the opportunity of the future," he said.

"We know that will be a high demand for the grant, and we may not be able to help everybody that makes an application, but if there was ever a time businesses in Lincolnshire needed our help, it's now."

At the end of January, furlough take-up was 10.7% – around 35,700 people – below the national average of 12.6%.

The authority has so far handed out £227 million of grant funding, but says up to 2,000 businesses have been unable to claim support.

Councillor Davie's proposals were backed by council leader Councillor Martin Hill, who said: "It has been exceptionally stressful for small businesses.

"Although the government has been very generous and given huge sums of money to support businesses […] there are unfortunately still some businesses which have fallen through the cracks and we need to support them."

He added: "It's not just about supporting those businesses to make sure they do survive, but also that they are in a good place to actually expand and invest."

Councillor Richard Davies, executive member for highways, said the spend "sends a really powerful message that Lincolnshire County Council, with its financial reserves […] is in a position when times are very tough to candidly get the chequebook out."

He said the £10 million for roads would go to the "core network" of roads which were the "lifeline of our communities"

"I'm afraid it's fair to say that some of our smaller rural roads, while incredibly important for connecting our more isolated rural communities, are in need of some support, and I think now's a great opportunity," he said.

Following the meeting of the executive, Katrina Pierce from the Federation of Small Businesses told a press conference the move was an "incredible intervention" from the county council.

"It's the first scheme of its kind in the entire country and I think this really blazes a trail, and we are going to be pushing very hard for local parties across the UK to follow suit.

"What councillors have shown here is incredible leadership, and a definite recognition of the agony and frustration that so many business owners across the country have faced since the outbreak of COVID-19 and they can clearly see that many can wait no longer. "

The budget changes, along with proposals already agreed to increase council tax by 1.99%, will go before scrutiny committee before going to a vote at Full Council on Friday, February 19.

Once agreed, the grants will be offered in a staggered approach, with bosses hoping to start the first batch at 12pm on Tuesday 23 February, followed by the other schemes in early March.