Close to £48bn has now been lent out through the government’s coronavirus loan schemes, with the bounce back loan (BBL) programme offering by far the most support for businesses.
It comes as the UK government accelerates plans to reopen the economy. Pubs, restaurants and cafes were opened at the start of this month and gyms, pools and sports facilities can reopen from 25 July.
As it eases the coronavirus lockdown, the government is gradually withdrawing its coronavirus support programmes such as the job retention scheme. The programme pays the wages of workers who may otherwise be laid off.
Roughly 9.4m people have now been furloughed through the government’s job retention scheme. More than of £28bn has now been claimed through the schemes by around 1.2m companies.
But business groups have warned the government could unleash a wave of unemployment if it moves too fast.
Bounce back loans do most of the work
Today’s figures indicate the full extent of the support banks and the government have offered. They showed that £32.8bn had been lent out through BBLs. Companies have made more than 1.3m applications for money, with 1.1m being approved.
Banks have lent out £12.2bn under the coronavirus business interruption loan scheme (CBILS). Yet the approval rate is only around 50 per cent. Roughly 112,000 applications have resulted in 56,000 loans.
Under the CBILS scheme, banks lend out sums of up to £5m to struggling companies. The government backs 80 per cent of the loans.
Business groups and firms criticised the scheme at the start of the coronavirus crisis, however. They said banks were not lending out money fast enough and said the lack of a full guarantee was a problem.
Chancellor Rishi Sunak therefore created the BBL scheme under which the government backs 100 per cent of loans up to £50,000.
The scheme rapidly overtook CBILS in size. But the 100 per cent state guarantee could leave the government saddled with the debts of insolvent small companies.
Last week, finance body The City UK predicted there will be a wave of defaults on £35bn of corporate debt taken on during coronavirus.
Combined with pre-coronavirus borrowing, The City UK estimates UK firms could hold £100bn of unsustainable debt by March 2021. That is when repayments of Covid loans first become due.