The Treasury may have to write off as much as £20bn worth of Covid-19 financial support on top of £4.3bn worth of Covid loans being lost to fraud.

That’s half of the £47bn lent through the Bounce Back Loan scheme alone.

And this is higher than the £18bn worth of Bounce Back Loans not being repaid that the business department has braced itself for.

>See also: Banks to get tougher on bounce back loan defaulters

Last month Lord Agnew of Oulton, the counterfraud minister, resigned over his frustration at “schoolboy errors” in oversight of Covid loan fraud, predicting billions of pounds worth of losses.

But accountancy firm Azets is talking about small businesses struggling to repay Covid loans, not fraud.

Duncan Swift, restructuring and insolvency partner at accountants Azets, said that a “substantial and increasing number of businesses are already struggling to make their loan repayments” on the Bounce Back Loan and Coronavirus Business Interruption Loan Schemes.

Under the former, £47bn was lent through 1.6 million loans, with a 100 per cent guarantee from the taxpayer; a further £26bn was lent via 110,000 CBILs, with the state providing an 80 per cent guarantee.

Swift said that companies, especially smaler businesses, “have had to endure an exceptionally difficult two years and while many have closed, many that have persevered have managed to survive only due to the loans and other Government-backed interventions. We believe that, across the UK, as much as £20 billion of all Coronavirus Business Interruption Loans and Bounce Back Loans will become defaulted in some shape or form.

“While most business owners have no intention of committing fraud, an increasing number are finding that their business lacks the assets, cash or income to meet loan repayment demands and deadlines.”

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