Chancellor Rishi Sunak is planning to extend the UK’s £68bn coronavirus emergency loan schemes to help support businesses struggling with the combination of further pandemic restrictions and a disruptive end to the Brexit transition, according to Whitehall sources.
With companies facing the economic impact of tiered social curbs across the UK until the spring, ministers are scrambling to find ways to help support businesses that face a further few months with much-reduced or no revenues.
Officials are drawing up plans to extend the three main loan guarantee schemes, including the government's £43.5bn coronavirus bounce-back loans programme, which are aimed at smaller businesses, most likely until the end of the financial year in March.
The move, which has been confirmed by several people familiar with the plans, could be announced as early as Thursday. The Treasury declined to comment.
The intervention comes as ministers are set to update the tier system on Thursday, with some regions expected to move from tier 2 to tier 3, the toughest level in which cafés, pubs and restaurants must close except for deliveries and takeaways.
London was moved into tier 3 on Wednesday, prompting further frustration and anger in the hospitality industry.
The decision is expected to also include the £19.6bn Coronavirus Business Interruption Loan Scheme and the £5bn Coronavirus Large Business Interruption Loan Scheme.
This would mean that businesses will have had support from government-backed loans for almost a year, with the programme having started in April.
Extending the loan schemes to the end of March would bring them in line with the government's flagship Job Support Scheme, or furlough, under which the state subsidises 80 per cent of the pay of those unable to work because of Covid-19 restrictions.
Initially, the loan schemes were supposed to remain in place only until September. But they have already been extended until the end of January because of fears about the punishing economic damage inflicted by Covid-19 restrictions.
Officials are concerned that businesses will remain under heavy pressure well into the new year, until a vaccine has been widely rolled out.
Ministers have also been in talks with business groups about finding ways to support companies through a potentially chaotic end to the Brexit transition period on December 31.
One person close to the discussions said that the Treasury saw the loan schemes, which have already supported about 1.2m companies, as one of the easiest ways to extend support without devising a costly financial bailout.
Ministers have also considered limited sector-specific help for industries likely to be hardest hit by Brexit-related border issues from January.
The loan schemes carry guarantees from the government but are provided by banks, which means the upfront financial cost to the Treasury is low.
However, the extension will also exacerbate worries about the longer-term impact of the schemes, given concerns that many companies will struggle to repay their loans, and over the high risk of fraud from organised criminals. Official estimates suggest that up to £26bn could be lost in defaults and fraud.
The loan schemes were designed to provide guarantees for banks to lend quickly and cheaply to struggling businesses during the pandemic. Bounce-back loans carry a full guarantee from the government for up to £50,000, while the others have a guarantee that covers the banks for about 80 per cent of the value of the loan.
The government is also working on a long-term successor to the three schemes, which is now expected to be delayed until after March.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzY0Y2E0YjdjLTNjYzgtNGUyNS05MzM3LTBmYTMyYmY3OGY4MNIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzY0Y2E0YjdjLTNjYzgtNGUyNS05MzM3LTBmYTMyYmY3OGY4MA?oc=5
2020-12-17 10:09:00Z
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