Chancellor Rishi Sunak is preparing to launch a new coronavirus support scheme that offers 100 per cent guarantees on loans to the smallest UK businesses, amid criticism that the current programme is not getting cash to firms fast enough.
The coronavirus business interruption loan scheme (CBILS) offers loans of up to £5m to companies with an annual turnover of up to £45m. The government guarantees 80 per cent of each loan.
However, the scheme has drawn criticism from firms who say they have struggled to meet banks’ criteria to get the loans. Bank of England governor Andrew Bailey, Labour shadow business secretary Ed Miliband and former chancellor George Osborne have all suggested upping the guarantee to 100 per cent, to calm banks’ nerves about risky lending.
Sunak has argued against the idea but is now “weighing up” a new scheme that would offer 100 per cent guarantees on lending to the smallest businesses, according to the Financial Times.
The Treasury declined to comment but said the whole package of lending schemes is constantly under review.
The FT reported that senior bankers are working with the Treasury on a possible scheme that might be launched as early as next week. It would target roughly 1m of the smallest businesses in the UK, which typically have only a handful of workers.
A Treasury source said no decision had been taken but underlined that the chancellor will not make changes to the CBILS scheme, where the 80 per cent guarantee will remain in place.
Sunak has come under pressure over the scheme from all sides. On Tuesday, businesses called for a bank-by-bank breakdown of the lending through the scheme as it emerged Natwest had made roughly half of the loans, despite 40 or so other banks being involved.
However, Sunak has resisted calls for a 100 per cent guarantee, saying on Monday he is “not persuaded” by the idea. He added: “When you look at the totality of what we’re doing, it’s more significant in scope and in scale of most of those other countries [offering 100 per cent loan guarantees].”
The Treasury has tweaked the scheme and says the scheme is ramping up. Loans for businesses increased £1.45bn in the week from 14 April to 21 April, UK Finance data showed yesterday. It brings total lending to £2.8bn.