The Charity Tax Group and the Charity Retail Association have urged the government to remove state aid restrictions on a grant scheme in order to free up funds for charity retailers.
Some £1.32bn of the government's Covid-19 business grants remain unspent, and charity bodies are saying that relaxing state aid rules on the Retail Hospitality and Leisure Grant Fund could support large charity retailers.
State aid limits mean that charities with retail chains have only been eligible to receive support for around 30 shops.
The Charity Retail Association estimates that charity shops lost over £285m in sales during the time they were required to close.
Charities are suggesting that because the government originally budgeted £12.3bn for grant schemes to help businesses and has paid out £11bn, it would be possible to relax state aid rules without incurring unbudgeted costs.
Robin Osterley, chief executive of the Charity Retail Association, said: “The government’s support for the retail sector has been widely welcomed with the Job Retention Scheme, 100% business rates relief for retailers and the retail grant scheme all helping charity shops to reopen and enabling customer sales to bounce back to around 70% of pre lockdown sales.
“Charity shops play a unique role on the high street and continue to be impacted by lower sales due to the pandemic, which is why we are again urging ministers to remove state aid restrictions preventing larger charity retailers receiving retail grants for more than around 30 shops.
“The unique nature of charity shops mean that they do not compete across international borders, which we believe gives ministers the scope to determine that state aid rules do not apply to charity retailers.”
Richard Bray, vice chair of the Charity Tax Group, said: “Charity shops contribute so much to the local communities in which they operate. Government support can help ensure that they continue to do this in spite the harsh financial climate caused by COVID-19.
“But a decision is needed now before there is damage that cannot be reversed.”