Council leaders have pledged a £40,000 funding lifeline to the Cowley Road Carnival to ensure it returns to the road.

Trustees of the annual event feared the carnival would have to be scaled down after the Arts Council rejected their bid for a £50,000 grant last month.

But now Oxford City Council and Oxfordshire County Council have joined forces to give the colourful parade the money it needs to ensure an event is held on Cowley Road.

The carnival regularly attracts 30,000 people each year but last year it was moved to South Park.

Following the councils’ rescue package, the carnival will return to Cowley Road for Sunday, July 4, with a music event the night before in South Park.

City council leader Bob Price said: “We worked on a joint bail-out with the county council because the Cowley Road Carnival is the premier multicultural event in Oxfordshire and we didn’t want it to founder.

“The additional £40,000, with £20,000 coming from each council, should mean the trustees can put on the programme they want, with all the usual displays, events and a procession.

“We were very keen to help the trustees of the carnival become self-sustaining but have made it very clear that this extra money is being given on a one-off basis.”

David Robertson, County Hall’s cabinet member for economic development, said the extra money was being given in addition to a £15,000 grant already allocated by each council, making a total of £70,000 of local authority funding this year.

He added: “Both councils are singing from the same songsheet.

“We will invest in this way for one year and hopefully it will be a wonderful carnival.”

After losing out on the Arts Council grant, trustees running the organising charity Cowley Road Works trimmed the proposed budget by £20,000 to £130,000.

Last night traders welcomed news of the funding lifeline.

Lance Cowan, who runs James Street Tavern, started the Save Cowley Road Carnival Facebook group, which has more than 950 members.

He said: “This is brilliant news and I hope it means the carnival will be just as good this year as it was in previous years.”

Karen David, a spokesman for Cowley Road Works, said: “This grant funding from the council certainly plugs a gap and means the carnival will definitely be back on the Cowley Road this summer.

“However, there is still a major shortfall and we still need to carry on fundraising. After we didn’t get the £50,000 grant from the Arts Council, we applied to them for a £10,000 grant, and it has just been confirmed that we didn’t get that either.”

Paul Wolf, chairman of Cowley Road Works, added: “We are extremely grateful to both councils for stepping in to help us in this way, but this only goes part of the way to fill the gap in our budget.

“We are now renewing our appeal to the business community to come forward with further financial help.”