Monday 1 June 2020 8:32 am

City urges government to hand coronavirus loans to firms hit by EU state aid rules

Save our SMEs

UK business groups have urged the government to find a way around EU state aid rules that have stopped British businesses from receiving coronavirus loans.

The CBI, British Retail Consortium and UK Hospitality have written to economic secretary John Glen urging him to extend the coronavirus loans scheme to firms that have failed to secure bailouts because they are loss-making.

Read more: Coronavirus loans hit £22bn, but just 50 per cent of CBILS lending approved

Fast-growing companies, and those with private equity backing, have pre-tax losses or debts that means the EU classifies them as “undertakings in difficulty”.

Small business owners have blasted banks responsible to approving these loans for rejecting them on these grounds, but lenders say they are only following the state aid rules.

Now the CBI, BRC and UK Hospitality have written to Glen citing their concerns about such “eligibility issues”.

They have called on the government to conduct an “urgent review” of its interpretation of the EU state aid rules and help more small businesses access coronavirus loans.

Read more: Bank of England to name recipients of coronavirus loans

The government’s main coronavirus business interruption loans scheme (CBILS) has so far paid out £8.2bn to  43,000 businesses.

But that represents only around a 50 per cent approval rate from 84,607 applications.

Now he letter from business bodies, seen by City A.M., argues that the state aid rules are for “normal times”, and should not form part of an approval process for emergency cash.

“Many high growth . . . firms that had taken on debt or burnt through share capital as they expanded before this crisis have now fallen foul of the [EU state aid] rules as they seek to access coronavirus financial support,” the letter read. 

“Important regional employers with private equity in their ownership — a major feature of the UK business environment for firms seeking investment for growth — are disproportionality impacted.” 

Read more: Banks blasted over ‘disappointingly slow’ pace of lending as coronavirus loans hit £5.5bn

The state aid rules will apply until the end of the UK’s Brexit transition period in December 2020.

“We are bound by EU state aid rules and have been actively engaging with European Commission to ensure our schemes give the best possible support within the existing frameworks,” a Treasury spokesperson said.