Thursday 14 May 2020 2:24 pm

Watch: Christian May discusses the problems with the CBILS scheme

City A.M. editor Christian May has said UK SMEs are hitting a brick wall trying to access the Coronavirus Business Interruption Scheme (CBILS), and warned there may be further trouble ahead. 

The CBILS scheme allows companies to apply for a loan through 60 accredited lenders to stay afloat during the coronavirus crisis. But issues with the application process started to appear early on, with criticism of how quickly banks were lending money. 

Speaking on an Institute of Economic Affairs panel, City A.M. editor Christian May said the scheme has frozen out thousands of small businesses. 

“Most lenders began treating this as if it was a normal commercial loan application,” he said. “If the government had tried to launch it in peacetime there would have been a trial period and consultations.” 

Of the 66,000 applications to the CBILS scheme, less than half have received a loan. “I don’t think those numbers are particularly impressive,” May said. 

Watch the discussion below:

Christian May speaks with the IoD’s Allie Renison and the IEA’s Victoria Hewson.

Listen to our daily City View podcast as we chart the economic fallout and business impact of the coronavirus pandemic.

Businesses ‘will fail’ as schemes unwind 

It is not just the CBILS scheme that will cause a headache for the UK’s SMEs. May noted that the lockdown measures paired with the loan and furlough schemes have frozen economic activity. “My fear is that there are plenty of businesses that will not survive the fall.” 

“I’m afraid when these schemes are withdrawn, the companies will find they cannot survive without this life support and it’s going to be extremely sad and very challenging on a national level,” he warned. 

The furlough scheme – which sees the government pay 80 per cent of furloughed staff’s wages up to £2,500  – has now been extended to October. 

More than three quarters of UK businesses have applied for the government’s job retention scheme, up from 66 per cent a fortnight ago.

“When you try to withdraw the [furlough] scheme it will make the implementation of it look like a walk in the park,” said May. “How do you pull it back? Do you do it sector by sector? Reduce the amount the government pays from 80 per cent to 60 per cent?” 

He added that when the furlough scheme is wound down, the government will be blamed for the subsequent redundancies. “You’re into a very political environment. You can bet that Labour and the trade union movement will be the first to condemn the government.” 

EU regulation ‘is hampering’ CBILS and other support

The British Business Bank requires eligibility for funding for CBILS to be based on EU Commission regulations. It sets out rules concerning an “undertaking in difficulty” and outlines circumstances which may disqualify a company from state aid. 

“It was an obvious obstacle but nobody was owning it as an issue,” said May. “Some banks said it was a matter for the Treasury, some people in the Treasury said we have no choice but to adhere to it, others said it wasn’t an issue.” 

Other EU member states have asked the Commission to nod through a change to the rules, while others have chosen not to apply to the rules. The UK, however, has “devised a whole new load of schemes to fill in the gaps”, said May. 

Some schemes have worked, particularly the bounce back loan scheme, which has helped up to 100,000 businesses access loans of up to £50,000.

“Hopefully this clears the runway for the banks to look at the mid-sized companies that need support [through CBILS],” May added. 

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