Business groups are calling on the Scottish Government to allocate more cash for potholed local roads, following Chancellor George Osborne's creation of a £200 million emergency fund for road repairs across the UK.

The Pothole Repair Fund announced in the March Budget included an allocation to devolved administrations.

But only the £168m of the fund available for England has been earmarked for roads, with no sign of Scotland's share being spent as the Chancellor had indicated.

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According to the Scottish Government, responding to the launch of The Herald's SME-SOS campaign in May, the Chancellor created a £200m UK Roads Fund, which was in fact a "funding stream for local authorities in England and Wales" and "does not apply to Scotland's local authorities".

Andy Willox, the Federation of Small Businesses' (FSB) Scottish policy convenor, said: "Small local businesses rely on local roads. They are the vital link between you, your services and your customers.

"The FSB in Scotland is concerned that many of our local roads are poorly maintained and we're worried about the impact this might be having on local economies.

"While the tyre, exhaust and suspension centres might be rubbing their hands, everyone else who runs vehicles across the private and public sectors will be paying the price."

Mr Willox continued: "The UK Government announced a pothole challenge fund during its last budget. The Scottish Government and local authorities may not think such a measure is necessary - however, if extra cash to bring our roads up to standard isn't ringfenced, then the danger is it will continually be swallowed up elsewhere."

The Scottish Government responded: "It is for Scottish ministers to decide how the consequentials from Westminster are spent…We have used our devolved powers over transport infrastructure wisely, and are committed to the largest transport investment programme that Scotland has ever seen. Despite cuts to Scotland's budget, local authorities will receive more than £10.6 billion this financial year and next."

In England, as a condition of receiving the new cash, local authorities are being required to publish quarterly progress updates on how many potholes have been repaired, with all work completed by March next year.

Mr Willox says the Scottish Government may argue that the money was used for other purposes at a time of financial squeeze, and local roads are the responsibility of autonomous local authorities also under pressure.

"But would Scottish local authorities welcome a dedicated potholes fund, and how can we ensure the maintenance of local roads is regarded as a transport priority?" he asked.

The FSB says the majority of its members conduct trade near their business, with almost 60 per cent of annual sales coming from local customers. The organisation surveyed members last year and found 88 per cent regard a van, car or motorbike as essential or important to their business. In Scotland, 75per cent of FSB members said the state of local roads and roadworks had negatively impacted on their business, higher than England as a whole (66 per cent), Wales (62 per cent), Northern Ireland (67 per cent) and every region of England.

Audit Scotland cites the Transport Research Laboratory's finding that every £1 reduction in local roads maintenance spend could result in a cost of between £1.67 and £1.76 to the wider Scottish economy.

In 2011, Audit Scotland found that in real terms, councils spent 13 per cent less and Transport Scotland spent 32 per cent less on road maintenance in 2009/10 than they did in 2004/05.

It warned: "By deferring essential expenditure on infrastructure, public bodies are storing up problems for the future and passing a greater burden on to generations to come."

Councils estimated it would cost £1.54bn to fix all carriageway defects in 2010, £554m more (allowing for inflation) than in 2004

Meanwhile, council payments to compensate drivers for pothole damage have rocketed, from around £340,000 in 2007/08 to £1.2m in 2011/12.

The figures, obtained by Scottish Conservatives, showed drivers received £3.56m in compensation over five years, with Glasgow paying out £1.82m.

The Scotland-wide roads audit body SCOTS reported last year that the condition of Scotland's local roads had marginally improved in the previous two years, despite 23 per cent less cash being available.

Chair of SCOTS Ewan Wallace said; "Partnership working among roads services across all Scottish councils is producing positive results. Road condition is now stabilising year on year. In difficult economic conditions, local councils are delivering efficiencies combined with increased investment in roads."

But its survey still found that the percentage of local classified roads in acceptable condition in 2012 was lower than it was in 2005.

An AA survey of 23,000 road users in January 2013 found 45 per cent of local roads users in Scotland consider roads condition to be poor, very poor or terrible - the worst rate in the UK.

Ross Martin, chief executive of the Scottish Council Development and Industry, said privatisation of trunk road maintenance had been "one of the success stories of the Scottish Executive" and he believed some authorities would start to look down that route.