More than £50bn has been borrowed by British businesses struggling to survive the pandemic in government-backed debt, showing the continued need for support for companies even as lockdown measures are eased.
The Treasury said on Tuesday that close to 1.2m businesses had taken bank bailout loans and other debt that were partly or fully guaranteed by the government. Most of this had been lent through the “bounce back” scheme, which allows very small companies to borrow up to £50,000 with only light checks on their ability to repay.
This has caused concern about the future of the scheme — which has supported banks to lend close to £34bn to 1.1m small firms — with estimates from the Office for Budget Responsibility that up to 40 per cent could default.
The Treasury also said that more than £500m had been lent to start-ups through its Future Fund scheme, which provides government debt that can convert into equity stakes.
On Tuesday, Killing Kittens, an organiser of female-oriented sex parties, said that it had been given £170,000 of government funding through a convertible loan from the Future Fund to help develop its digital services.
The loan will be converted into equity at the next funding round at a 30 per cent discounted rate, meaning that the government is set to own a 1.47 per cent stake in the adult social network.
More than 57,000 businesses have borrowed £12.7bn using the coronavirus business interruption loan scheme (CBILS), which offers larger loans of up to £5m. The coronavirus large business interruption scheme (CLBILS) — which part guarantees loans of up to £200m — was used to lend £3.1bn.
The rate of increase in companies taking government-backed loans has slowed. Last week, banks had approved £47.9bn through government-backed coronavirus lending schemes, of which £32.8bn was made through bounce back loans.
Stephen Pegge, managing director of commercial finance at UK Finance, which represents large British banks, said the figures “demonstrate the unprecedented levels of support provided by the industry and are testament to the hard work of staff on the ground”.
He added: “It’s important to remember that any lending provided under government-backed schemes is a debt not a grant, and so firms should carefully consider their ability to repay before applying.”
The Treasury also said on Tuesday that the furlough scheme — which helps pay the wages of more than 9m people — has now cost £31.7bn. Next month, employers will start to share some of these staff costs again by paying national insurance and pension contributions. The self employed income support scheme has had £7.8bn in claims so far.
So far, more than 53,000 restaurants have signed up to the government’s ‘eat out to help out’ scheme, which will give customers a 50 per cent discount every Monday, Tuesday and Wednesday in August.
