The Bank of England has injected £1.9bn into UK companies since 23 March via its short-term lending programme, figures have shown, as it tries to shore up the economy amid the coronavirus outbreak.
The lending comes via the Bank’s covid corporate finance facility (CCFF), through which it buys companies’ short-term debt, known as commercial paper.
The CCFF is a key plank of the government’s £330bn coronavirus lending programme. It hopes the money will mitigate disaster for the economy during the coronavirus pandemic.
Threadneedle Street has unveiled a range of other measures to boost the economy. These include slashing interest rates to 0.1 per cent, a record low, and pledging to buy £200bn more government and corporate bonds.
Following the playbook from the 2008 crisis, the Bank has also reopened “swap lines” with the US Federal Reserve. UK banks claimed $6bn (£4.8bn) yesterday via this facility to help ease the pain on their balance sheets.
The uptake for the CCFF comes as warnings grow about the effect of coronavirus on the global and UK economies.
Ratings agency Fitch today predicted the UK economy will shrink by 3.9 per cent in 2020. And figures yesterday showed claims for benefits via Universal Credit soared to 950,000 in the last two weeks.
Worries over access to lending
The government and BoE have been criticised for some confusion about the lending schemes on offer, however.
Business groups such as the CBI have said some firms are “falling through the cracks”. They say some businesses do not have the “investment grade” credit rating needed to access the CCFF, but are too big for the other loan programmes on offer.
S&P Global Ratings told City A.M. that it had received around 30 enquiries by Monday from UK firms that hope to be rated investment grade – at low risk of default – so as to access the CCFF.
But S&P’s head of EMEA sales Lynn Maxwell said that “less than 25 per cent” of the firms expressing interest “have investment grade potential”. She added that it is “early days,” however.
Chancellor Rishi Sunak has promised to help broaden the reach of UK loan programmes. He has said the government is working on making sure all companies can get the help they need.