Chesterfield MP Toby Perkins has warned there could be 'serious repercussions' after it was announced the town will relinquish its membership of the Sheffield City Region.
Chesterfield Borough Council is currently a member of the Sheffield City Region Local Enterprise Partnership as well as the Derby Derbyshire Nottingham Nottinghamshire (D2N2) LEP.
But the Government now requires that, from April 2020, all councils be represented by only one LEP.
Those councils that have membership of more than one LEP have been asked to choose to be a member of just one- or face losing future funding.
As a result Chesterfield Borough Council, which is part of Derbyshire, has now announced it intends to remain in D2N2.
Mr Perkins said: “I am hugely disappointed that the Borough Council have been forced into this decision due to a nonsensical change in legislation by the Government.
"The benefit that Chesterfield has secured from being part of the SCR LEP cannot be underestimated.
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"We have secured millions in Local Growth Funding that has helped pave the way for the extensive regeneration we are seeing in our town."
At present, the members of the Sheffield City Region LEP are Barnsley, Doncaster, Rotherham, Sheffield, Chesterfield, Derbyshire Dales, North East Derbyshire, Bassetlaw and Bolsover councils.
From April 2020, the four South Yorkshire councils will remain in the Sheffield City Region LEP.
Mr Perkins added: "The Government decision to force Chesterfield to only be part of one LEP fails to recognise how our town relies on being a vital part of Derbyshire whilst also having a strong relationship with Sheffield.
"The way our businesses operate, and the way local economy works, cannot and should be constrained by arbitrary rules on funding and investment.
"I know my Labour colleagues at the town hall are disappointed and angry that they have been forced to choose between the SCR LEP and D2N2, which could have serious repercussions for how we attract funding and investment.”