Guidance

Flood and coastal erosion risk management funding policy guidance

Updated 1 April 2026

Applies to England

1. Introduction  

This guidance explains how the 2025 flood and coastal erosion risk management (FCERM) funding policy will work in practice for new project opportunities.  

It explains how: 

• much funding a project may be eligible for 
• to provide the data and information needed to assess value for money, which will allow project opportunities to be checked against the government’s strategic objectives 
• to apply consistent optimism bias rates for different project types - this helps improve early cost estimates and allows fair comparison between projects 
• to submit a new project opportunity for funding consideration 

Government’s funding policy and strategic objectives are: 

• value for money - assessing project costs and benefits including flood damages avoided and wider environmental benefits 
• funding contributions, deprivation, and natural flood management (NFM) 

The guidance applies to: 

• risk management authorities (RMAs) including the Environment Agency, local authorities, water companies and internal drainage boards 
• non-RMAs, including non-governmental environmental organisations, charities and landowners who can lead NFM projects 

This guidance describes the data and information required to determine if a project

• is eligible for FCERM funding
• should be put forward for the FCERM investment programme

It explains how to submit project data and information to the Environment Agency.  

There will be more projects that are eligible for investment than funding available. Projects will need to be prioritised to meet government targets and achieve best value for money.

This guidance is a living document. The content will be updated as we learn from implementing the funding policy. You can register for updates to this web page to be informed of guidance updates.

2. A new funding approach 

The 2025 FCERM funding policy aims to: 

• promote value for money floods solutions 
• support economic growth 
• speed up building flood and coastal erosion schemes 
• protect homes, businesses and agricultural land across towns, cities and rural areas 

This guidance describes steps for applying the FCERM funding policy. It shows you how to: 

• check if your project is eligible for funding 
• meet the government’s strategic objectives, either immediately or in the future 

Government’s funding policy and strategic objectives are: 

• value for money 
• reducing flood and coastal erosion risk  
• focusing on deprived areas - at least 20% of FCERM investment will be directed to the most deprived quintile, and at least 40% to the 2 lowest quintiles combined, over both the next 3-year and 10-year periods  
• increasing investment in natural flood management (NFM) - at least 3% of FCERM investment over the next 3 years, and 4% of FCERM investment over the next 10 years is directed to NFM 
• prioritising projects with contributions from others 

3.  Project development stages in the FCERM investment programme 

This guidance describes the data and information required to determine if a project:

• is eligible for FCERM funding 
• should be put forward for the FCERM investment programme

It explains how you submit project data and information to the Environment Agency.  

The Environment Agency considers projects from applicants against the government’s policy and strategic objectives. After this, you will be informed whether you have approval to develop your project further. You can read about on project gateway stages in chapter 3 of the His Majesty’s Treasury (HMT) guide to developing the project business case. 

This guidance does not cover the gateway stages that projects follow after they have been submitted for funding consideration.

4. Steps to determine project eligibility for the FCERM investment programme 

You can submit a project if it helps areas at risk of flooding and coastal erosion. You must determine if a location is at flood or coastal erosion risk. 

Funding arrangements vary depending on project type.   

4.1 Steps to determine if your project helps areas at risk of flooding and coastal erosion

Eligible projects include those that manage:  

• coastal erosion 
• flooding from rivers 
• flooding from the sea 
• surface water flooding 
• groundwater flooding  

Ineligible projects are those that manage: 

• sewer flooding, unless caused by increased rainwater 
• flooding caused by burst water mains 
• actions identified in a Reservoirs Act 1975 section 10 inspection report, unless an Environment Agency owned reservoir 
• projects included within the habitat compensation restoration programme managed by the Environment Agency

The Environment Agency has new and improved flood and coastal risk data for the whole of England, which show locations at risk.  

These are the: 

• National Flood Risk Assessment (NaFRA)
• National Coastal Erosion Risk Map (NCERM)  

These products use the best available data, information and modelling from both the Environment Agency and local authorities. They also include projections for future flood and erosion risk with climate change. NaFRA and NCERM national data informs national and local decision-making. They should be supplemented with local data and knowledge where this is available.  

We want to make best use of national data to reduce the amount of time and money RMAs spend on project development. In some locations, other locally held datasets may be more suitable for justifying investment. RMAs should use their best judgement as to what is the best evidence base. Where local data differs from the national data clear justification must be included. 

As understanding of flood risk changes over time, the national NaFRA and NCERM data will be updated regularly as new evidence becomes available. All RMAs are encouraged to contribute evidence and data to the Environment Agency, which maintains both NaFRA and NCERM. 

Maps of flood risk for surface water, rivers and the sea are on check your long term flood risk and for coastal erosion on explore coastal erosion risk. You can access the NaFRA and NCERM data on the Defra data service platform: 

• Risk of Flooding from Rivers and Sea - Postcodes in Areas at Risk 
• Risk of Flooding from Rivers and Sea - Properties in Areas at Risk 
• Risk of Flooding from Surface Water 
• National Coastal Erosion Risk Mapping  

4.2  How to determine what type of project you have 

The level of funding available is set by:

• project cost 
• whether the funding is for refurbishing or replacing existing assets, or building new assets

4.3  Eligibility and definitions for asset refurbishment projects  

Asset refurbishment is a significant renewal to one or more components in an existing asset that is not covered by routine maintenance.  

Asset refurbishment includes carrying out work to mitigate for the loss of  asset performance. This covers issues that asset maintenance cannot manage and that would be significant and permanent if not fixed.  

It does not include asset replacement projects where an existing asset at the end of its life is replaced with another like for like asset which sustains the standard of service.  

Under the 2025 FCERM funding policy existing FCERM assets are eligible for 100% of funding for refurbishment.   

The capital grant eligibility supplementary information provides more details on project definitions and types.  

4.4  Eligibility and definitions for new, or improved asset projects 

Projects that are not refurbishment are eligible for 100% for the first £3 million, and 90% for costs above £3 million.  

These include: 

• projects replacing existing assets with a like for like replacement 
• projects building new or improved assets 
• projects with combined asset interventions 

Further supplementary information on project definitions and type can be found within the capital grant eligible investment.  

Projects cannot be artificially split into smaller components to fall below the £3 million fully funded threshold.   

Multiple NFM or sustainable drainage systems (SuDS) interventions may benefit the same location, or nearby locations. If so, you should group these and submit them as a single project to avoid double counting of benefits. 

4.5  Eligibility for natural flood management standalone projects 

NFM projects include interventions that protect, restore, or mimic the natural functions of catchments, floodplains, rivers and the coast to reduce flood risk. 

They also: 

• provide wider benefits to people, nature and the environment 
• support biodiversity 
• improve water quality 
• enhance landscape resilience 

A range of NFM interventions are eligible for funding. These include: 

• river and floodplain management 
• woodland management 
• run-off management 
• coast and estuary management 

Standalone NFM is where a flood risk reduction relies primarily or entirely on natural processes and is not in combination with a engineered defence.  

You can see a detailed list of NFM eligible interventions.

To be eligible for funding a standalone NFM project must: 

• implement one or more eligible NFM measures  
• demonstrate a flood risk reduction or coastal erosion benefit 
• be value for money 
• align with the shoreline management plan (SMP) management direction – this applies to coastal NFM only 

To receive funding a standalone NFM project should also: 

• have maintenance plans with funding options in place as this will not be funded through the FCERM investment programme 
• have any landowner support and agreements secured or close to being secured 
• use local nature recovery strategies to identify opportunities and maximise the environmental benefits of NFM projects 

In combination NFM projects as defined in the detailed list of NFM eligible interventions are eligible for funding. However, they should be assessed for funding as a new, or improved asset project and not as standalone NFM.

Using NFM heat maps 

The Environment Agency has produced national NFM heat maps. These highlight areas where NFM interventions are likely to provide the greatest flood risk benefits. These maps are available to support projects which do not have access to local NFM benefits evidence. The Environment Agency will keep improving the NFM heat maps as more evidence becomes available, for example, local NFM opportunity mapping which strengthens local evidence.  

Organisations eligible for standalone NFM projects  

RMAs, the Environment Agency and non‑RMAs are eligible to apply for funding for standalone NFM projects. Non‑RMAs mean any legal person or other legal entity.

Likely lead applicants can include: 

• environmental non-governmental organisations (NGOs)  
• charities 
• farmers and landowners 
• businesses 
• community groups 
• catchment partnerships 

4.6  Eligibility for property flood resilience projects 

Property flood resilience (PFR) is a set of modifications added to a building to: 

• improve its flood resilience 
• reduce flood damage 
• speed up recovery after a flood

PFR includes resistance interventions that keep as much water out of the property as possible. These include: 

• flood doors
• flood barriers 
• self-closing air bricks
• non-return valves 

Internal adaptations, termed recoverability, are not eligible for funding. These include: 

• tiled floors 
• raised electrics  
• flood resilient kitchens  

4.7  Eligibility for sustainable drainage projects (SuDS)  

Sustainable drainage is designed to:

• slow and store rainwater
• reduce the quantity and speed of water entering drainage systems
• reduce surface water flooding

Definitions of different types and uses of sustainable drainage options to manage surface water flood risk are available in the national standards for sustainable drainage systems.  

A sustainable drainage system controls surface water run off close to where it falls. It combines built and nature-based techniques to mimic natural drainage as closely as possible.  

In urban locations, there may be nature-based techniques which are eligible as standalone NFM projects. These are set out in the NFM eligible measures guidance.  

A single sustainable drainage feature proposed in a benefitting area should be submitted as a single project. Multiple sustainable drainage features proposed in a benefitting area should be submitted as combined project to avoid double counting of benefits.   

4.8  Eligibility for coastal erosion projects 

Coastal erosion is a natural process which leads to the movement and loss of soil, sand and bedrock. To be eligible for funding, coastal erosion projects and their related consequences must be directly associated with the sea. 

Coastal erosion risk data is available and management policies are available within Shoreline Management Plans.  

Support on managing coastal erosion in a local setting is available in: 

• local plans, prepared by a local planning authority 
• other local supplementary planning guidance including any designated coastal change management areas (CCMAs)

4.9 What the exemptions to eligibility are 

Exemptions to eligibility rules, with different processes for submitting projects, include nationally significant infrastructure projects (NSIPs).  

To meet the Environment Agency’s statutory obligations as an asset owner the following are exempt:  

• actions identified in a Reservoirs Act 1975 section 10 inspection report  
• habitats compensation restoration programme (HCRP) 

These exempt project types should not follow this guidance or use the process it sets out to submit projects. Separate arrangements are in place for these projects. 

5. Information required by the Environment Agency to ensure projects are eligible against the funding policy  

For each of the project types described above, information is required to make sure they align with government’s funding policy and strategic objectives. 

6. Calculating value for money   

The policy follows the value for money principles defined in the Green Book. Value for money means: 

• weighing a project’s costs against its benefits 
• making sure it supports strategic objectives and government policy 

Value for money will be used by the Environment Agency to determine if a project receives Defra FCERM funding. Calculating benefits remains the cornerstone of our approach to FCERM funding. Some projects tend to have higher benefits in terms of damages avoided. This usually applies to projects in places at higher risk of flooding, erosion, or both, and with a higher density of properties and infrastructure.

FCERM projects provide a wide range of benefits. Benefits assessed by projects include flood damages avoided, but also wider benefits like natural capital, which adds up all environmental benefits. 

Value for money is based on 2 components: 

The first component is net present value (NPV) divided by the total Defra FCERM funding. This provides a “return on government investment” score that enables consistent comparison between projects.  

NPV is defined as the present value benefits minus the present value costs to the nation. 

The second component is achieving the strategic objectives. These are:

• additional contributions 
• deprivation - at least 20% of FCERM investment will be directed to the most deprived quintile, and at least 40% to the 2 lowest quintiles combined, over both the next 3-year and 10-year periods 
• NFM - at least 3% of FCERM investment over the next 3 years, and 4% of FCERM investment over the next 10 years is directed to NFM  

Applicants submitting projects can calculate the return on government investment score and see how they contribute to the 3 strategic objectives above. Advice on how to collect the data and information needed is provided in the next section.

6.1 Calculating the benefits and costs of your project 

Each project must collect information to enable them and the Environment Agency to calculate a return on government investment score.  

The information needed is:  

• the area of land and number of properties benefitting from FCERM investment
• the economic benefits within that area of land in the form of present value benefits
• the whole life costs of the project in the form of present value costs to the nation, including optimism bias 
• total Defra FCERM funding required 

To ensure we achieve the strategic objectives, you should also provide information on:  

• the areas benefitting from investment, to be able to calculate the levels of deprivation  
• contributions that would be required from other funding sources  
• the project’s proposed intervention type or types - for example, if a project is a standalone NFM project 

6.2 Understanding the area of land and properties benefitting from investment to reduce flood risk 

A benefit area shows land and the property and infrastructure within it that will receive a flood or coastal erosion risk benefit from a particular investment. Your benefit area should be the best estimate. You will revise and update this if the project is approved and moves to the next stages of project development.  

The properties within an area of land that would benefit from the investment include residential and non-residential properties. 

Examples of residential properties include: 

• houses 
• apartments 
• park homes and static caravans with an address 
• care homes 

Examples of non-residential properties include: 

• schools 
• hospitals 
• industry 
• retail 
• leisure 

The 2025 FCERM funding policy sets out that existing properties, including those built after 2012, are to be included in the property counts benefitting from investment. 

You can read instructions on defining project benefit areas and counting the properties benefitting within those areas.

6.3 What economic benefits are and what types of benefit can be included  

FCERM investments generate a wide range of both monetised and non-monetised benefits. These benefits can be grouped into 3 types: 

• flood and erosion benefits 
• wider, non-flood and erosion benefits 
• enhancement benefits 

Flood and erosion benefits 

These are benefits to people, property, businesses and infrastructure from increased resilience to flooding or erosion.  

This captures: 

• direct damage to buildings and contents – avoided damage to contents and avoided costs of refurbishment for damage to buildings, which includes residential property, commercial property and publicly owned buildings such as schools and hospitals 
• infrastructure damage – avoided damage to infrastructure – most floods will also affect transportation routes and utilities leading to disruption and outages 
• vehicle damages – avoided costs of replacement and repair of vehicles 
• emergency services – avoided costs to the emergency services and local authorities 
• evacuation and temporary accommodation – avoided costs of re-homing people while their properties are repaired – impacted people may need to stay out of their homes from a period of several weeks to a year, depending on severity and impact 
• mental health treatment costs – avoided NHS treatment costs for anxiety, depression and post-traumatic stress disorder, which increase after a flood –research from the UK Health Security Agency shows sustained and elevated levels of mental health impacts for victims of flooding 
• risk to life – avoided fatalities, valued using an approach based on the value of a statistical life used in Department for Transport guidance 
• recreation benefits – the benefits of avoiding lost recreation, for example, beaches, promenades, footpaths and open spaces 
• agriculture damages – avoided damage to crops and agricultural land – the FCERM appraisal guidance for agricultural land takes account of individual floods, long term change and total loss of agricultural land - the damage values are updated annually, agricultural damages can be combined with ecosystem services damages to build a holistic picture of the impact on the land
• net carbon benefits – these are the carbon emissions avoided by not flooding property and cars, minus the whole life carbon costs of the scheme 
• environmental and heritage damages – environmental damages avoided are valued using the ecosystem services approach – heritage is also valued too 
• regeneration and the uplift in land value benefits 

Wider non-flood or erosion benefits 

Wider benefits which are non-flood or erosion benefits occur as a by-product of increasing resilience to flooding or erosion.  

Examples include: 

• carbon sequestration from NFM 
• increased tourism from beach nourishment 

There is no cap on the percentage share of wider benefits. This avoids disadvantage for NFM projects or other projects with significant benefits that are a natural by-product of increasing resilience.

Enhancement benefits 

These are actions carried out as part of the FCERM project, but which are not necessary to increase resilience to flooding or erosion.  

Examples include: 

• public art installations 
• active travel infrastructure 
• visitor facilities 

These benefits: 

• must not be included in any benefit calculations 
• cannot be paid for using FCERM grant in aid  
• cannot be included in any FCERM grant in aid funding bids 

6.4 Methods for calculating economic benefits  

The Environment Agency provides methods and spreadsheets to help you calculate the economic benefits of flood and coastal erosion risk management for new project opportunities. You can use the economic benefits methods for projects looking to: 

• refurbish or replace existing assets 
• build new assets 
• reduce surface water flood risk through sustainable drainage 
• reduce coastal erosion risk 
• install PFR 
• include NFM alongside hard‑engineered flood or coastal defences 
• install a standalone coastal NFM project under £3 million 

Further information on methods for standalone NFM projects reducing flood risk from rivers and surface water is below.  

We do not recommend that projects do detailed benefits calculations at this stage. If, as a project develops, your early high-level benefit estimates change and the project is no longer value for money then it may be stopped. Therefore, to avoid abortive work you need to make sure your benefit estimates are realistic.

6.5 For standalone NFM projects reducing flood risk from rivers and surface water   

You should use the Environment Agency’s national NFM benefits method to calculate the surface water and river flood risk reduction and wider benefits of standalone NFM projects.  

6.6 For landscape or catchment scale standalone NFM above £3 million  

You will need to contact the Environment Agency.  You can do this by emailing NFMProjectOpportunities@environment-agency.gov.uk. You will then be able to discuss the project in more detail with specialists.

You need to take this additional step because we are still developing:

• our understanding and evidence base of the flood and coastal erosion risk benefits of NFM at this scale
• consistent assessment techniques to calculate the benefits

7. Determine the cost of your project 

Projects need to calculate their whole life costs so the Environment Agency can calculate the NPV of a project. Estimating costs at this early stage involves a high level of uncertainty.  

To address this uncertainty, your projects should apply:  

• an appropriate risk assessment – identifying, analysing and evaluating uncertain events that could affect a project’s objectives, and determining how those risks should be managed 
• optimism bias – to reflect uncertainty and the tendency to underestimate cost and time at early project development stages 

If, as the project develops, initial high level cost estimates change to the extent that the project is no longer value for money, the project may be stopped or reviewed.  

Your project scope should be settled at Gateway 2. To minimise abortive work, you must ensure that cost estimates are realistic at early project development stages. 

7.1 How to estimate initial whole life costs 

With the exception of PFR, you should build your cost estimate using available costing methods and from benchmarking data. Benchmarking is the analysis of information and good practice from past projects.  

Possible sources of cost data include: 

• recent tenders  
• completed projects  
• published articles  
• estimating price books  
• estimates and quotations from companies for specialist work  
• asset owners and operators for cost records  

For PFR projects the average cost of measures per property, including surveys, is £16,000.  

7.2 Applying an optimism bias range to initial whole life costs 

Applying an optimism bias range at this stage provides a reasonable estimate of risks when details are not known. It means that early cost estimates are closer to later cost estimates once the project scope is settled and investment decisions are made at later stages.  

Applying an optimism bias range at this early stage ensures: 

• a consistent comparison between different projects 
• that a feasible range of costs are considered so that potential value for money can be better understood 

The aim of the approach is to understand the realistic cost of the project, it does not increase the final project outturn cost. This is because optimism bias ranges reduce through the project development stages as clarity on the project scope and cost certainty increases.  

If a project is approved for early project development, Environment Agency projects are expected to follow internal guidance on managing costs and risks. Other RMA projects are expected to follow their own appropriate procedures.  

You should apply the optimism bias ranges in the table 1 to initial whole life cost estimates. They have been derived from historic project data and will be reviewed as evidence improves.

Table 1: optimism bias ranges

Project type	Optimism bias - lower rate for use in main cost estimate	Optimism bias - Higher rate for use in reasonable upper case scenario
NFM and PFR	30%	30%
All other project types	60%	90%

You do not need to consider time estimates, which are the best estimate for how long it will take to develop and complete the project, at this stage. After Gateway 0 all projects should apply an optimism bias rate of 60% to time estimates.

7.3 Work out the return on government investment score 

When a project has estimated the benefits and costs, the return on government investment can be calculated. This is the NPV divided by the total Defra FCERM funding.  

When calculating this score the lower optimism bias range figure should be used.  

8.  Achieving the strategic objectives 

8.1 Account for areas of high deprivation 

We aim to invest in areas that are most deprived and hardest hit by flooding and coastal erosion. 

Deprivation is measured using the Index of Multiple Deprivation 2025 (IMD25), produced by the Ministry of Housing, Communities and Local Government (MHCLG).  

Using the IMD25 and applying the strategic objective we will make sure at least: 

• 20% of FCERM investment will be directed to the most deprived quintile 
• 40% to the 2 lowest quintiles combined 

This applies over both the next 3-year and 10-year periods  

The Environment Agency will perform the calculations based on the area of land benefitting from investment submitted for each project. 

8.2 Additional contributions  

Projects should use FCERM investment money to attract extra contributions from public, private and charitable partners. This will help improve project quality and outcomes for FCERM projects.  

The funding approach is designed to support better prioritisation of projects. Projects that can attract and secure additional funding are more likely to be taken forward. It also gives greater choice for communities, via regional flood and coastal committees (RFCCs), to decide how to best use local levy contributions to support local priorities.   

Nature‑based credits arising directly from NFM measures funded by the FCERM investment programme may be sold. These will help to secure additional project contributions to do more or fund future maintenance. Such credits include biodiversity net gain units or carbon credits. 

For SuDS projects where work is expected alongside other infrastructure improvements, we would expect to see a higher level of additional contributions suggested at this early stage. 

Legally binding agreements for contributions between funding partners are not required until a project produces a full business case (at Gateway 3). At this point any use of additional funding through green finance must also be clearly set out.  

At this early-stage contributions should be a best estimate and include the most likely source. If as a project develops the early high-level contributions estimate changes and the project is no longer value for money then it may be stopped. Therefore, to avoid abortive work applicants need to ensure contribution estimates are realistic. 

Early discussions with partners on the need, scope and costs of a project improves quality and outcomes for FCERM projects. It also increases the opportunities to source extra contributions.  

8.3  Natural flood management strategic objective 

The investment programme will track expenditure on standalone NFM projects to ensure the government’s strategic objectives are being met. The objectives are that at least 3% of FCERM investment over the next 3 years, and 4% of FCERM investment over the next 10 years is directed to NFM.

9. Submitting a project for funding consideration  

In order to submit a project opportunity for funding consideration the following information is required:

• the expected type of project, for example refurbishment, replacement or new defence  
• what primary source of risk is being managed  
• whether the project is a standalone NFM project and what NFM measures are proposed 
• the area of land benefitting from investment 
• the economic benefits within that area of land in the form of present value benefits  
• the whole life costs of the projects in the form of present value costs to the nation  
• total Defra FCERM funding required 
• contributions that would be required from other funding sources – this should also include contributions over and above the minimum requirement 
• number of properties benefitting 
• whether the project is exempt and defined as a moderation project 

Environment Agency projects will submit all projects, except standalone NFM projects over £3 million via AIMS:PD. AIMS:PD will be ready to receive new project opportunities from 1 July.  

Other risk management authority projects will submit all projects using submit a proposal for flood and coastal erosion risk management project funding. The only exception is standalone NFM projects over £3 million.

The submit a proposal for flood and coastal erosion risk management project funding service will be ready to receive new project opportunities from 1 July. 

Non-RMAs will submit standalone NFM project opportunities under £3 million via a form from 1 July.  

RMAs and non-RMAs submitting standalone NFM projects above £3 million should e-mail NFMProjectOpportunities@environment-agency.gov.uk.