Our government-backed loan schemes have been a demonstration of what can happen when banks, the government and businesses work together.
In a time of extreme disruption and uncertainty, we got much-needed support out to businesses when they needed it most. This protected jobs and livelihoods, and meant that when we were able to start safely reopening the economy, businesses stood ready for the challenge ahead. We acted swiftly so that lenders could support businesses with confidence, enabling them to bounce back.
Through this unprecedented work, the Treasury has provided over £50bn of support for more than one million businesses via a range of support schemes — all designed to cater for businesses of all sizes and sectors.
The Coronavirus Business Interruption Loan Scheme (CBILS) injected £12.6bn to more than 57,000 firms, while Bounce Back Loans put a further £33.6bn in the accounts of more than a million of our smallest businesses — from the Shortbread Company selling biscuits in the West Midlands, to YES Energy Solutions installing energy-saving measures in Yorkshire.
The Future Fund provided £512m to more than 500 high-growth startups, which will be key to our successful recovery and the next chapter in our economic journey. And the Covid Corporate Financing Facility provided £18.7bn to our biggest employers in the country, including the likes of John Lewis, and Rolls Royce.
At the beginning, there were some gaps. Due to restrictive EU rules, some businesses, classed as “undertakings in difficulty”, which needed these vital funds to survive were not able to access finance through our schemes. “Undertakings in difficulty” are businesses with high levels of debt and accumulated losses, which are common features for startups.
We felt it was unfair that these firms were denied crucial support necessary to keep trading just because they were at the early stage of their life. So we called upon the European Commission, alongside industry bodies, to relax the rules to give our smallest businesses a chance.
And I’m pleased to confirm that, from today, businesses in this category, which have fewer than 50 employees and a turnover of less than £9m, can now apply for government-backed finance through CBILS, giving them a lifeline during the crisis.
I am today calling on all lenders asking them to make sure they take this rule change into account when offering finance, and have written to them alongside the minister for small business to that effect. There are over 5.6m businesses with fewer than 10 employees, and a fifth of those are one-man bands. We’ve already helped hundreds of thousands of businesses like these, and this change means we’ll be able to help many more.
Now that businesses have obtained an incredible £50bn of support, attention is naturally turning to the question of repayments. We have been clear that these loans are loans and not grants — albeit generous loans with fixed interest rates and no repayments due for the first year. Borrowers must make every reasonable effort to repay these on time — and if timely repayment is not possible for whatever reason, as set out in the scheme guidance, lenders are expected to work with the borrower to help them find a way to repay if they can.
To ensure these schemes are a success and help Britain’s economy to bounce back from the crisis, we will continue to work closely with both lenders and businesses to ensure that we support firms while protecting the taxpayer.
Small businesses are the backbone of the UK economy, and with the changes to the support schemes announced today, I am confident that they can help us build back better after this pandemic.
Main image credit: Getty