COVID-19 emergency loan schemes may have saved 500,000 businesses

The government’s coronavirus (COVID-19) emergency loan guarantee schemes may have saved between 150,000 and 500,000 businesses, according to research from the British Business Bank (BBB).

The research also estimated that the loans have helped save between 500,000 and 2.9 million jobs.

In March 2020, in response to the global pandemic, the government deployed three loan-guarantee schemes. They were the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS).

According to the BBB’s research, between 10% and 34% of BBLS borrowers and between 7% and 28% of CBILS/CLBILS borrowers could have permanently ceased trading in 2020 without the schemes.

Catherine Lewis La Torre, CEO of the BBB, said: ‘The COVID-19 emergency loan schemes were designed to address a drastically altered economic landscape for smaller businesses as lockdowns took effect.

‘This evaluation is the first indication of just how important those schemes were in saving livelihoods, businesses and hundreds of thousands of jobs, and we are proud to have played a vital role in their delivery.’

The bank found that 15% of bounce back loan borrowers have signed up for Pay As You Grow, which allows them to repay the loan over a 10-year period, with an additional 4% intending to do so in the future.

Eight in 10 borrowers (82%) used some form of government support, most commonly furloughing staff through the Coronavirus Job Retention Scheme (51%), deferral of VAT payments (31%) and accessed cash grants for small businesses related to the pandemic (28%).

However, there have been high levels of fraud with defunct businesses applying for loans and due to the extent of checks by banks, up to £4.9bn was paid out to fraudsters and for spurious claims as businesses were allowed to self-certify their eligibility, viability and creditworthiness.

Government estimates also indicate that nearly £15bn in loans will not be repaid and these defaults will have to be covered by taxpayers.

Dame Meg Hillier MP, chair of the Public Accounts Committee, said: ‘BEIS says it saw this risk coming but it’s really not clear where government was looking when it set up its initial Covid response. It offered an open goal to fraudsters and embezzlers and they have cashed in, adding billions and billions to taxpayer woes.’