Work on flood defences in Lancaster can’t begin because of a £1.8m funding shortfall.
Plans to strengthen the riverside area near Caton Road are on hold until the extra cash is found.
Meanwhile work to improve the aging millrace sewers under Lancaster city centre won’t get under way until Lancashire County Council completes a full investigation into the December 2015 floods caused by Storm Desmond.
News of the funding hitch came days after flash flooding in Morecambe and Lancaster put several homes and businesses under water once again, including Go Burrito on Lower Church Street.
There was also localised flooding in parts of the district on Monday night.
James Short, boss of Go Burrito, said after the July 19 floods that there were major problems with drainage in Lancaster and he was frustrated with the lack of communication from local authorities.
Mr Short said: “This will only keep happening.”
Go Burrito was one of several Lancaster businesses which shut for a lengthy period after the December 2015 floods. Others still haven’t reopened.
Lancashire County Council will take the lead on a project to improve drainage below the city centre.
A county council spokesman said an investigation into Lancaster’s surface water drainage must be completed before any funding bid or work can begin. Findings are due to be published early next year.
Meanwhile Lancaster City Council will lead on a £9.4m project to strengthen the Caton Road defences after publishing its own report into Storm Desmond in 2016.
An Environment Agency spokesman said money would come from the Regional Flood Committee, Government funding, European funding and hopefully, contributions from local businesses.
Coun Janice Hanson, Lancaster City Council cabinet member for regeneration and planning, said: “While potential sources, including £3.1m from the European Regional Development Fund, have been identified, there is currently a significant funding shortfall of £1.8m.
“The city council will continue to work with the Environment Agency (EA) and a number of other partners to find additional sources of funding to allow it to go ahead. The council has applied for the maximum (EA) grant available of £2.5m under this funding scheme, to be approved.
“The EA’s grant, allocated through a complex formula, ranks commercial schemes as a lower priority than schemes designed to protect residential areas.
“Even though the EA ranks the Lancaster scheme as among its highest priority schemes for Lancashire, its funding formula will not allow it to wholly fund the project, and significant partnership funding is therefore required.”