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UK firms worry they can't repay government-backed virus loans

[LONDON] UK firms are warning they will struggle to pay back government-backed financial support they received during lockdown, adding a new threat to Britain's fragile economic recovery.

Over 40 per cent of the mostly small and medium-sized businesses surveyed by the British Chambers of Commerce (BCC) and TSB said they took on debt through state lending programmes during the crisis.

Of those, one-in-four said they may have to scale down operations to repay it, and one-in-10 believe they could have to cease trading altogether.

The government helped keep companies afloat through lockdown by guaranteeing loans worth almost £53 billion (S$95.49 billion) to more than 1.2 million firms. While many have now reopened or even ramped up operations, the disruption and uncertainty still cloud the outlook.

The survey of 502 companies found that 64 per cent of debtor firms think paying it back will have a negative effect on their business. Two in 10 said it would mean scaling back investment plans.

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"If not addressed, large debt burdens could stifle the recovery, threatening jobs and constraining business activity and investment," said BCC director general Adam Marshall. "Government, regulators and banks must work together with business communities to find solutions that help firms repay." UK consumers appear to be bouncing back after the virus lockdown after spending rose for the first time in six months in August, according to Barclaycard.

Sales of essentials and fuel rose, while the number of card transactions in pubs and bars climbed 9.3 per cent as Britons became more confident about leaving home.

Retail sales rose last month on a like-for-like basis from a year earlier, according to a separate report by the British Retail Consortium. Still, business is down since the start of the pandemic and many stores are struggling, it said.

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