South Yorkshire Chambers have lost a lucrative contract to help jobseekers start their own business - despite having some of the best figures in the country.
Staff could face redundancy after a £1.55m deal to run the New Enterprise Allowance in Yorkshire and the Humber was won by Swindon firm Pinnacle People.
The two-year deal starts in January.
More than 890 companies have launched in Sheffield since the scheme started in April 2011, the third highest number in the country. South Yorkshire has consistently been in the UK top 10.
The NEA provides start-up jobseekers with a business mentor and a weekly allowance. They can also apply for a loan.
About 12 people, including full-time Chamber staff and freelances, work on the project across the county.
Chamber chiefs fear the decision by the Department for Work and Pensions could ruin a quality programme that is a ‘natural fit’ with their activities.
It is understood Pinnacle’s bid priced each job at about £275 - half the £550 it costs now.
Andrew Denniff, the chief executive of Barnsley and Rotherham Chamber, said chasing savings could backfire.
He added: “I’m very disappointed to lose this contract. It’s the kind of work we thrive on and that’s borne out by the success rate. You get what you pay for and the DWP might end up with an inferior product. My chamber will lose three very experienced and respected consultants who have always given a quality service.
“I had never heard of the company before this. I don’t know how much local knowledge they have got.”
Doncaster Chamber administers the NEA in South Yorkshire for the Department for Work and Pensions and sub-contracts work to Sheffield Enterprise Agency, part of Sheffield Chamber, and Barnsley & Rotherham Chamber.
Doncaster joined a regional consortium to bid for the contract but lost out, despite the DWP saying those with local knowledge would be ‘given preference’.
Dan Fell, deputy chief executive of Doncaster Chamber, said: “Doncaster Chamber and its local partners have delivered business start-up support under the NEA banner for a number of years and we have regularly been ranked as a top 10 performer on this contract in the UK.
“While we are disappointed not to have been selected, the chamber will continue to provide business start-up support to local residents and entrepreneurs as part of its core business and in support of a number of other local initiatives designed to stimulate enterprise in Doncaster.”
A Department for Work and Pensions spokesman said: “To build on the success of the scheme, new payment-by-results contracts will ensure people are fully supported through key stages of setting up a business while providing the taxpayer with best value for money.”
A Pinnacle People spokesman said: “We have been delivering services to support customers back to work in Yorkshire since 2011.
“We currently deliver Work Programme, European Social Fund Support for families with multiple problems and Community Work Placements programmes across West and North Yorkshire supporting over 3,000 people per year.
“We operate from over 15 sites in the county and have a team of local employees providing the best possible support to our customers. We are already delivering two New Enterprise Allowance contracts in Thames Valley and Leicestershire.”
n Unemployed Inga Dirziute set up the Pure on Raw cafe in Shalesmoor after completing the NEA scheme and being mentored through Sheffield Enterprise Agency.
n Self-employed joiner Walter Spencer, of Manor Park, set up MCD Home Improvements after spending years in and out of work after being made redundant by Henry Boot in 2009.