Chancellor Rishi Sunak has poured cold water on calls for the Treasury to provide a 100 per cent guarantee for coronavirus business interruption loans.
The government is currently underwriting 80 per cent of loans to small businesses that are struggling for survival.
However, there have been a chorus of voices – including three former Conservative chancellors – calling for that guarantee to be lifted to 100 per cent, as is the case in Switzerland.
Speaking at the Downing Street press conference, Mr Sunak said he was “not persuaded” that a total state guarantee was the right thing to do, despite pleas from small businesses being rejected through the Coronavirus Business Interruption Loan Scheme (CBILS).
Mr Sunak argued that when the plethora of government coronavirus emergency business funding was looked at in total, with grants for small businesses, as well has the furlough scheme which launched yesterday, the British help package was generous.
Speaking at yesterday’s Downing Street press conference, Mr Sunak said: “Some people have made comparison with what’s going on in other countries. When you look at the totality, what we’re doing is more significant in scope and scale of most other countries.”
Mr Sunak said the number of loans provided under the emergency business loans scheme had doubled since last week to 12,000 out of 35,000 applications. The acceptance rate was now running at between 80 per cent and 90 per cent, he said. It is understood that about £2bn of credit has now been provided.
Despite more than 40 accredited lenders including Barclays and Lloyds, the bulk of loans is being made by just two banks: Royal Bank of Scotland/NatWest alone has provided £937 million worth of credit to 5,600 companies, while HSBC has approved 2,026 loans worth £278.6m. Barclays, Lloyds and Santander refused to reveal the extent of their lending.
Mr Sunak said the number of businesses being supported by the scheme was “double what it was a week ago, which was double what it was the week before”.
Treasury has been liaising with British Business Bank as to how the CBILS could be tweaked to be more efficient and simplified.
Mr Sunak said he was “watching carefully” that credit would be going to deserving businesses.
Roger Frye, finance director of managed services provider eacs, commented: “It is absolutely clear that the current Government coronavirus loan scheme needs review. We would argue that the government needs to guarantee 100 per cent of the loan, making banks more of a delivery mechanism for grants as opposed to playing the traditional role of credit gatekeeper.”
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