More than 100 Northern Ireland businesses face delays in grant payments from government agencies because of a wrangle between British government ministers and the European Commission. Local firms have been told no money can be paid out until the difficulty is resolved.

Schemes allowing EU governments to award grants to businesses concluded at the end of last year. New regulations are under discussion but have not yet been agreed between Britain and the Commission. Until they are, the Northern Ireland Industrial Development Board, the small business agency LEDU, the Northern Ireland Tourist Board, and the Industrial Research and Technology Unit may not pay out any new grants to companies with plans of which they approve.

Last month telecoms firm Nortel announced an investment of £30 million sterling (€49 million) at its north Belfast plant in an IDB-backed expansion programme. A delay in payment of the IDB grant should not cause a major problem to such a company, but for smaller firms with limited resources and for which the grant is a vital contribution, the stalemate between government and Commission could cause serious problems.

Mr Adrian Houston, a committee member of the Federation of Small Business, said the delay was particularly unfortunate for Northern Ireland, where small and medium firms were the economy's lifeblood.

"When small firms have an idea, they need to move quickly," he said. "If they don't, there is always a chance that someone in another country, or even another town, will move in ahead of them, and gain a significant commercial advantage in the process." Mr Houston was astonished the situation had been allowed to arise in the first place.

"Government is all about good management of the economy," he said, "and the government in this case is clearly doing a lot of harm to small companies, simply because it has not sent in its application in an acceptable form in time for the funding to be put in place."

The Commission is working to resolve the problem as quickly as possible. But, according to Mr Jim Dougal of the EU office in Belfast, the regulations must be observed.

"The fact is there are guidelines which have to be followed. They are there to ensure that there is no distortion in competition policy. There has to be transparency, there has to be comparability within the regions, and it is very unfortunate that the proposals made by the UK government did not accord with the guidelines laid down by the European Commission," said Mr Dougal.

For its part, the Department of Trade in London insists it has made the appropriate application, and that it is now up to the Commission to play its part in approving grant releases.

A Commission spokesman would only say the application was being considered and it was hoped the problem would be resolved as soon as possible. In the meantime, many Northern Ireland businesses must wait for their money.