The European Commission announced that £27m will be given to areas affected by the decline in the textile sector, but Leicestershire failed to meet certain criteria to qualify for the money.
Leicestershire CC European officer Andy Reid said the county had a very strong case to win the grant.
He explained: 'Leicester is recognised both by the commission and the UK government as one of the most textile-dependant counties and cities in the whole of the country. We thought our case was watertight.
Knitwear unions in Leicestershire said the failure to get a slice of the European cash could lead to job losses. A spokesman for the Knitwear, Fashion and Allied Trades, Barry Morris, said it would hit an industry already reeling from huge redundancies.
He commented: 'Ten thousand jobs have gone in the industry in the last 15 years. No one has suffered more than Leicester. You only have to travel round Leicester and Leicestershire to see the empty factories.
'I grew up in this town and it is heartbreaking now to see being left to go as it is. This industry can offer a future; that's the point. It needs assistance; it needs political assistance'.