Rishi Sunak has extended the UK’s £68bn coronavirus emergency financial support including the Bounce Back Loan Scheme until the end of March.
The Bounce Back Loan Scheme, the Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme had all been due to close at the end of January.
With swathes of southern England joining the north in Tier 3 lockdown, effectively shutting down pubs and restaurants, the Treasury needed to support small businesses which face months with much-reduced or no revenues.
The Treasury said: “We are extending the schemes now, ahead of Christmas and further into the new year, to ensure that businesses can continue to access the support they need to grow and recover.”
The loan schemes provide guarantees for banks to lend quickly and cheaply to struggling businesses during the pandemic. The Bounce Back Loan Scheme (BBLS) carries a full guarantee from the government for up to £50,000, while the others have a guarantee which covers the banks for about 80 per cent of the value of the loan.
However, the government itself has admitted that 60 per cent of Bounce Back Loans will never be repaid, leaving the taxpayer facing a bill of £26bn for the scheme.
The Treasury is now working on a permanent successor to the three schemes, which will now be delayed until April.
Furlough extended to April
Extending the loan schemes to April brings them in line with the government’s flagship Coronavirus Job Retention Support Scheme, or furlough, which has now been extended to the end of April.
The government will continue to pay 80 per cent of the salary of employees for hours not worked until the end of April. Employers will only be required to pay wages, National Insurance Contributions (NICS) and pensions for hours worked; and NICS and pensions for hours not worked.
Meanwhile, the Bank of England said it would pump more cheap funds into banks to encourage small business lending, while keeping interest rates on hold at 0.1 per cent.