The government has set out its new flood defence funding formula in its newly published flood and coastal erosion risk management (FCERM) policy.

The FCERM policy document published by the Department for Environment, Food & Rural Affairs begins by saying that the previous government and “left flood defences in their worst condition on record” and that the current government had inherited an “outdated funding formula” for allocating money to proposed flood defences.

It points out that by 2024, flood defences were at their poorest condition on record, and communities and flood risk management authorities (RMAs) struggled to deliver new flood and coastal erosion defences.

“We are replacing that complex and outdated approach with simpler and more transparent rules.

“Our new funding policy and record levels of investment will help kickstart economic growth, accelerate the construction of flood and coastal erosion schemes and protect homes, businesses and agricultural land across our nation’s towns, cities and rural areas,” the foreword to the policy says.

The policy says the government will promote the right floods solution in the right place at the right time and sets out what it aims to achieve, including:

• Optimise funding between building new flood projects and maintaining existing defence assets. New strategic objectives will drive funding towards the most beneficial interventions measured by an integrated set of outcome metrics.
• Ensure funding is allocated in locations that reflect new risk information from the Environment Agency’s latest national flood risk assessment and other key sources of evidence.
• Simplify the current complex funding model.
• Have a better spread of resilience actions, including more innovative approaches such as natural flood management (NFM), sustainable drainage and property flood resilience (PFR).
• Retain the core principle of local partnership funding to make government investment go further, but simplifying the funding formula significantly.

On funding eligibility, the policy states that FCERM projects that are prioritised will be eligible for FCERM funding to the following levels, depending on project size and whether the funding is for refurbishing existing projects or for building new projects:

• for existing projects and assets - eligible for 100% of costs for refurbishing existing assetsfor new or improved projects and assets - eligible for 100% for the first £3 million, and 90% for costs above £3 million.

Prioritisation by value for money

FCERM projects will be prioritised by their benefit-to-cost ratios to drive value for money, with partnership contributions boosting a project’s prioritisation. The government takes the view that this will also encourage the joined-up partnership working that improves project quality.

Other strategic objectives in the FCERM investment programme include:

There will be an objective to guarantee deprived communities receive at least the same share of investment as their representation in the population, as these communities struggle more to recover from flooding. A minimum of 20% of FCERM investment will go to the most deprived quintile and a minimum of 40% to the 2 lowest quintiles combined, over both the next 3 and 10 years.

NFM can reduce flood risk while also delivering multiple benefits to people, communities and the environment. There will be an objective to help tackle NFM projects being under-represented in the investment programme. A minimum of 3% of FCERM investment will go to NFM over the next 3 years and a minimum of 4% over the next 10 years. We will be investing at least £300 million in NFM over 10 years – the highest figure to date for the floods programme.

The FCERM will also remove risk bands acting as barriers to investment - FCERM projects will no longer need to demonstrate they are moving properties from a higher risk band to a lower one to attract Defra FCERM funding. This was unfairly disadvantaging good projects that achieve lower levels of flood risk reduction, such as NFM, sustainable drainage or PFR projects compared to traditional engineered defences.

The government intends to review the new policy in 3 years to assess its effectiveness in managing flood and coastal erosion risk, allowing it to see if any policy adjustments are needed.

The new policy has taken into account responses to a major public consultation on flood and coastal erosion funding rules which ran from 3 June 2025 to 29 July 2025. Defra has published a summary of responses which includes a detailed analysis of responses to the consultation.

Click here to access the new FCERM policy and responses to the consultation.

WaterBriefing is supporting the upcoming Floodex & National Drainage Show which takes place in London on 26 – 27 November 2025 in London. Now in its tenth year, Floodex will run alongside the National Civils Show, opening the event up to whole new audience of thousands of interested civil engineers, contractors, developers and planners, involved in construction, utilities, highways, railway and coastal defence professionals.

Click here for more information about Floodex and to register for your free ticket to attend

Click here for more information about National Civils and to register for your free ticket to attend