How flood schemes are funded in England (2026 rules)
Since April 2026, new flood schemes in England compete for government funding on one main score, the return on government investment: the scheme’s net present value divided by the Defra funding it asks for. Partner contributions, deprived areas and natural flood management still count. I help councils and partners build a case that scores well.
Real model output: a 1-in-100-year flood, plus 29% for climate change, spreading across the Hamstall Ridware floodplain in the first-generation 2022 model; 149 ha at its peak. Replayed, not to time scale. How to read this: drag the slider to move through the flood. The homes and land it reaches are what a scheme’s benefits are counted from.
Animated map: in the 2022 model of a 1% AEP flood with a 29% climate allowance, water spreads over 79 hours to cover 149 hectares of the River Blithe and Trent floodplain at Hamstall Ridware, Staffordshire.
- of a new scheme’s first £3m of costs eligible for Defra funding; 90% above that
- 100%
- of FCERM investment aimed at the most deprived fifth of areas; at least 40% at the two most deprived fifths
- at least20%
- optimism bias on costs for most projects; 30% for natural flood management and property resilience
- 60%
- benefit–cost ratio of an earth bund at Hamstall in my own appraisal, against 1.6 for a wall
- 4.6
About the author. Hisham Nuhu is a UK-based flood and disaster risk specialist. He worked at England’s Environment Agency from 2019 to 2025 and holds an MSc in Water Science, Policy and Management from the University of Oxford. He works remotely or in-country with governments, development banks, UN agencies and consulting firms, and in England with councils, communities, landowners and developers.
How do we get government funding for a flood scheme in England?
Through a risk management authority. Councils, internal drainage boards and water companies put projects forward through a GOV.UK online service, and the Environment Agency through its own system. Projects are prioritised by return on government investment and by strategic objectives. Community groups, charities and landowners can put forward standalone natural flood management projects under £3 million themselves.
There will be more eligible projects than money. The guidance says so plainly, and that projects “will need to be prioritised to meet government targets and achieve best value for money”. A project whose early estimates change so that it is no longer value for money can be stopped.
That makes the early numbers matter. A cost estimate that grows later, or a benefit that cannot be evidenced, can take a scheme out of the programme.
What changed in April 2026?
A new investment programme started under Defra’s 2025 funding policy. It replaces what the government called an outdated funding formula with simpler rules: projects are prioritised by their net benefits divided by their total Defra funding, plus strategic objectives for partner contributions, deprived areas and natural flood management. Some well-advanced projects stay on the old rules.
Under the old rules, grant was paid at set rates for each outcome, such as households better protected, and partners funded the rest. The new rules ask a simpler question: how much net benefit does each pound of Defra money buy?
On transition: council and other authority projects under £50 million that had an approved outline business case by 31 March 2026 stay on the old rules, as do larger ones with an approved full business case. Environment Agency projects stay if they had an approved full business case by that date. Everything else moves to the new rules.
| Rule | What the guidance says |
|---|---|
| Value for money | Two parts: the return on government investment (net present value divided by total Defra FCERM funding), and achieving the strategic objectives |
| Funding rates | Refurbishing existing assets: 100%. Other projects: 100% of the first £3 million and 90% above; projects cannot be split to stay under £3 million |
| Strategic objectives | Additional contributions; deprivation, with at least 20% of investment to the most deprived fifth of areas and 40% to the two most deprived fifths (Index of Multiple Deprivation 2025); natural flood management, at least 3% of investment over 3 years and 4% over 10 years |
| Optimism bias | 60% on costs for most projects (90% for the upper case); 30% for natural flood management and property flood resilience; 60% on time estimates after Gateway 0 |
| Contributions | Early estimates can be best estimates naming the likely source; legally binding agreements are not needed until the full business case, at Gateway 3; scope settled at Gateway 2 |
| Who submits | Risk management authorities through a GOV.UK service (the Environment Agency through its own system); others, for standalone natural flood management under £3 million, through an NFM project opportunity form |
| Local levy | Regional flood and coastal committees get more choice over how local levy is used for local priorities |
What is the “return on government investment” score?
The project’s net present value, meaning its present-value benefits minus its present-value costs to the nation, divided by the total Defra FCERM funding it asks for. It lets the Environment Agency compare projects consistently. Because the bottom of the fraction is only Defra’s money, every pound a partner contributes raises the score.
Illustration, with round numbers. A scheme with £10m of benefits and £4m of costs has a net present value of £6m. If Defra pays all £4m, the score is 6 ÷ 4 = 1.5. If partners put in £1m, Defra pays £3m and the score rises to 6 ÷ 3 = 2.0. Not a real scheme.
It is not the same as a benefit–cost ratio. A ratio divides the benefits by all the costs, whoever pays them. This score divides the net benefit by government money only, so a scheme with a modest ratio and strong contributions can outscore one with a higher ratio and none.
Do partner contributions still matter?
Yes, twice over. They lower the Defra share, which raises the return on government investment, and “additional contributions” is one of the strategic objectives. Early estimates can be best guesses that name the likely source; legally binding agreements are not needed until the full business case, at Gateway 3.
On council-led schemes in London I was the Environment Agency’s partnership contact on grant and partnership-funding requirements. At Chessington, a park basin that fills only in storms, and at Worcester Park, a wetland at the head of the Beverley Brook, that meant supporting funding and procurement, tracking finance weekly, analysing delays and visiting the sites.
| Scheme | Led by | My part | Estimated value | Status |
|---|---|---|---|---|
| Flood storage basin, Chessington | Royal Borough of Kingston upon Thames | Partnership advisor: grant requirements, funding and procurement support, weekly finance tracking, delay analysis, site visits | est. US$1.7m | Completed 2025 |
| Worcester Park nature-based scheme | London Borough of Sutton | Partnership advisor on development and funding: grant and partnership-funding requirements, weekly finance tracking, delay analysis, site visits | est. US$1.5m | Construction from spring 2026, after my tenure |
| SuDS in Sutton’s Schools | London Borough of Sutton | Fortnightly progress meetings and checks with the council | est. over US$2m | Council-led programme |
| Pumping-station refurbishment, three stations | Environment Agency | Support project manager: hydrological and hydraulic advice on flows, scope and planning, task tracking, quarterly finance and audit | est. US$1.5m | Supported 2023–25 |
Values are my estimates of each scheme as delivered. Station names are withheld.
How do you compare options on one consistent basis?
Put every option through the same appraisal: the same damages, the same price base, the same 100-year period, the same discount rates and the same optimism bias. Only then do the ratios mean anything side by side. At Hamstall Ridware, on that basis, an earth bund scored about 4.6, a set-back flood wall 1.6 and an embankment 1.0.
This was my own cost–benefit appraisal, self-initiated and not a formal Environment Agency submission. It is screening level, on a standard Green Book basis, using the flood damages from my Hamstall study, including harm to mental health, and 60% optimism bias on costs. All three options hold the same 910 m line.
The bund’s range, 3.3 to 7.0, comes from the spread of unit rates for earthworks of that size. Even at the top of its cost range it is well ahead. The farmers’ bund itself has no recorded dimensions or cost, so the bund row describes the option appraised, not the bank as built.
Three ways to hold the same line, on one basis: the earth bund is far ahead
How to read this: each bar is one option’s benefit–cost ratio. Above 1, the benefits outweigh the costs. Tap a bar to read it.
My own screening-level appraisal on a standard basis (self-initiated, not a formal Environment Agency submission). Costs from the Environment Agency’s evidence on fluvial defence costs; discount rates from the FCERM appraisal guidance.
| Option | Benefit–cost ratio | Range across unit rates | What it is |
|---|---|---|---|
| Earth bund | 4.6 | 3.3–7.0 | A grassed earth bank on the 910 m defence line |
| Flood wall | 1.6 | – | A set-back flood wall on the same line |
| Embankment | 1.0 | – | A raised embankment on the same line |
Which benefits are easy to miss?
Harm to mental health, and the extra homes a climate allowance brings in. The Environment Agency publishes mental-health costs of flooding per adult, by flood depth, for use in appraisal; in my Hamstall appraisal they were about a quarter of the average annual damage. And the allowance decides how many homes count: 14 buildings, or 21.
People whose homes flood can carry the effects long after the water has gone, which is why the Environment Agency gives appraisals a way to count them. Leaving them out undercounts what a scheme prevents, and it undercounts most where property values are modest, because the cost per adult does not depend on the house.
The climate allowance works the same way. In the Hamstall model, today’s 1-in-100-year flood reaches 14 buildings and the same flood with the 2080s allowance reaches 21. A scheme designed for the allowance counts those extra homes in its benefits.
Households better protected depend on the allowance you design for
How to read this: each bar is one modelled flood; the gauge on the right (wide screens) or the readout (phones) shows the deepest water at any building. Tap a bar or a button to step through.
Hamstall Ridware, 2024 model (Flood Modeller–TUFLOW, 5 m grid), built jointly with an Environment Agency modelling colleague.
Show the data as a table
| Flood | Buildings flooded | Deepest at a building, m | 0.1 m or deeper | 0.3 m or deeper |
|---|---|---|---|---|
| 1% AEP flood (1 in 100) | 14 | 0.13 | 1 | 0 |
| 1% AEP + 15% (2020s allowance) | 16 | 0.24 | 8 | 0 |
| 1% AEP + 17% (2050s allowance) | 19 | 0.31 | 9 | 1 |
| 1% AEP + 29% (2080s allowance) | 21 | 0.34 | 9 | 1 |
| 0.1% AEP flood (1 in 1,000) | 29 | 0.46 | 17 | 5 |
What does a business case need at each gateway?
The five cases of HM Treasury’s business case model (strategic, economic, commercial, financial and management), built up in stages from a strategic outline case to a full business case. The FCERM guidance asks for the scope to be settled by Gateway 2 and binding partner agreements by the full business case, at Gateway 3.
| Stage | What it settles | Where I can help |
|---|---|---|
| Project opportunity | The need, the outline options, early cost and benefit estimates and likely contributions, submitted for funding consideration | Early estimates that hold up later |
| Outline business case | The case for change, options appraised, a preferred option; scope settled by Gateway 2 | Options appraisal and cost–benefit on one basis, with mental-health damages |
| Full business case (Gateway 3) | Final costs and procurement route; legally binding partner agreements | Evidence for contributions; the finance and programme |
| Delivery | Spend against profile, claims, change control and reporting | Weekly finance tracking and delay analysis, as on the Chessington and Worcester Park schemes |
On the schemes I supported I worked within these gates. The business cases were prepared and approved by the scheme owners and the funder.
Can you support our council or drainage board?
Yes, as a defined package or as extra capacity for your team: options appraisal and cost–benefit analysis, a benefits case that counts harm to mental health, evidence for partner contributions, or weekly finance tracking and delay analysis on a scheme in delivery. A fixed fee and a timescale come first, in writing.
For drainage boards and asset owners: I was support project manager on the refurbishment of three Environment Agency pumping stations, an estimated US$1.5m, to make them eel-compliant under the Eels (England and Wales) Regulations 2009 while keeping their flood-risk function.
For international programmes the same skills are on option appraisal and co-financing.
Questions people ask
What happened to the partnership funding calculator?
The 2025 policy replaced the old funding formula; Defra’s consultation response noted “broad support for the removal of the partnership funding calculator”. New projects are prioritised by return on government investment and strategic objectives instead. Some well-advanced projects stay on the old rules.
Can a community group, charity or landowner apply?
For standalone natural flood management projects under £3 million, yes, through an NFM project opportunity form sent to the Environment Agency. Other projects go through a risk management authority, usually the council or the internal drainage board.
Does the local levy still exist?
Yes. Regional flood and coastal committees consent to the Environment Agency’s annual programme and can raise and spend local levy. The new policy gives them more choice over how to use it for local priorities.
Is your Hamstall appraisal a business case?
No. It is my own screening-level appraisal, self-initiated and not a formal Environment Agency submission. It shows the method: options on one basis, damages including mental health, and optimism bias on costs.
Have you worked under the new rules?
I worked under the 2020 partnership-funding model; the 2025 policy applied after my tenure, and I follow it closely.
Sources
- Environment Agency (2026). Flood and coastal erosion risk management funding policy guidance. GOV.UK, published 3 March 2026, updated 1 April 2026. Return on government investment, funding rates, strategic objectives, optimism bias, gateways and submission routes.
- Defra (2025). Flood and coastal erosion risk management funding policy. GOV.UK consultation outcome, 10 November 2025. The new programme from April 2026, transition rules, the partnership funding calculator, local levy.
- Environment Agency (2026). Applying the 2025 FCERM funding policy: new project opportunity guidance and resources. GOV.UK, published 3 March 2026.
- Environment Agency. Flood and coastal erosion risk management appraisal guidance. GOV.UK.
- Environment Agency (2021). Mental health costs of flooding and erosion. GOV.UK, 28 October 2021.
- Environment Agency (SC080039). Cost estimation for fluvial defences: summary of evidence. Unit costs used in my Hamstall appraisal.
Work with me
Putting a scheme forward under the 2026 rules?
Send me the project brief, the options so far and where the money might come from. I will reply with a scope, a fixed fee and a timescale. I don’t take on work on cases I handled while at the Environment Agency.