UK's pandemic loans for businesses lost £421b so far

THE UK government has paid out almost half a billion pounds to cover losses on government guaranteed loan programmes made during the pandemic.

A total of £421 million (S$707.7 million) has been paid to banks under the emergency scheme, the first official breakdown of the programme from the Department for Business, Energy and Industrial Strategy shows.

Of that, £352 million is to cover losses on the 100 per cent guaranteed bounce back loan scheme (BBLS) for small businesses. With more than one in 6 loans at risk or in default, the cost to the state is certain to rise.

The Treasury set up emergency loans at the start of the crisis to ensure companies had the cash to keep going. Two measures implemented for larger companies were 80 per cent backed by the state, but the smaller BBLS, with an individual loan limit of £50,000, was fully underwritten by the government.

The Office for Budget Responsibility expects the government to write off over time £15.5 billion of the £46.7 billion of BBLS loans, and a further £2.5 billion of the £30 billion lent under the other schemes. The budget watchdog estimates that 7.5 per cent of the loans were taken fraudulently.

Theo Agnew, a former Treasury minister, quit in January in protest at what he claimed was the Treasury's failure to tackle BBLS fraud under former Chancellor of the Exchequer Rishi Sunak, who is now standing in the race to become prime minister. Agnew called for such a lender dashboard to provide transparency on losses and repayments.

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The government said high street lenders, through whom the programme operated, have identified 18,000 BBLS loans as "suspected fraud", 1.2 per cent of the total. It added that it was "too soon to accurately assess levels of fraud and credit losses".

To date, 7 per cent of BBLS loans have been fully repaid and 15 per cent are at risk - either in arrears or default. The government guarantee has paid out on less than 1 per cent of BBLS loans so far, its lender dashboard shows. BLOOMBERG