British businesses borrowed 50 per cent more in the second quarter of 2020 than in the whole of the previous year as the coronavirus crisis hammered the economy, new figures show.
Businesses borrowed a total of £34.5bn in the three months to the end of June, according to a report by banking lobby group UK Finance – 50 per cent more than the total for the entirety of 2019.
Stephen Pegge, UK Finance’s managing director of commercial finance, said “demand f
or additional support was substantial” as lockdown measures introduced to contain the virus brought large swathes of the economy to a halt.
Pegge said that the increase in borrowing reflected “this significant demand with new overdraft facilities as well as the Government’s business interruption finance schemes providing support”.
Over a million UK businesses had had applications to government coronavirus lending schemes such as the Coronavirus Business Interruption Loan scheme (CBILs) by the end of June, the organisation said.
Over £57bn has been lent out to businesses through the schemes, which offer varying levels of government guarantees for the loans.
Fears have been raised over the scale of potential government losses through the Covid lending facilities, especially the Bounce Back Loan scheme (BBL), designed to keep small businesses afloat during the pandemic.
The government guarantees 100 per cent of each BBL. It emerged last week that the head of the state-owned British Business Bank, which oversees the scheme, raised concerns over its vulnerability to fraud.
The National Crime Agency has launched an investigation into organised crime linked to BBLs, and the government spending watchdog is due to publish a report on the scheme tomorrow.
“The finance industry continues to work closely with government and regulators to deliver the support schemes alongside its usual assistance measures to help viable businesses as they plan for recovery,” said Pegge.