Covid business loans ‘saved hundreds of thousands of jobs’

Anywhere from 500,000 to 2.9 million jobs might have been lost if not for the loans, reviewers found.

Many businesses were unable to trade during lockdowns and were forced to borrow to survive. (Kirsty O’Connor/PA) (PA Wire)

Three schemes that funnelled £78 billion to businesses around the UK during the coronavirus pandemic might have saved millions of jobs, a report has claimed.

Researchers said anywhere between 500,000 and 2.9 million jobs might have been lost without the loans.

The research was commissioned and paid for by the British Business Bank, which oversaw the three loan schemes on behalf of the Government

It estimated that between 146,000 and 505,000 businesses that took Bounce Back loans might have gone under without the support. That is up to a third of the total number of businesses on the scheme.

This evaluation is the first indication of just how important those schemes were... and we are proud to have played a vital role in their delivery

Catherine Lewis La Torre

Another 5,000 to 21,000 companies that took loans under the Coronavirus Business Interruption Loan Scheme (CBILS) and its sibling programme for larger companies, CLBILS, might also have gone out of business, the report said.

“The Covid-19 emergency loan schemes were designed to address a drastically altered economic landscape for smaller businesses as lockdowns took effect,” said British Business Bank boss Catherine Lewis La Torre.

“This evaluation is the first indication of just how important those schemes were in saving livelihoods, businesses and hundreds of thousands of jobs, and we are proud to have played a vital role in their delivery.”

In the early days of the pandemic, only the CBILS and CLBILS programmes were launched by the Government.

But their size and the hoops that companies had to jump through proved too restrictive for many businesses, ministers later argued.

This eventually led to the Bounce Back Loan Scheme, launched in early May 2020.

Within a week, 270,000 loans had been paid out. A month after it launched 800,000 companies had taken the loans.

Many loans were in accounts within 24 hours because the banks did not need to do anything but the most basic checks on those they were lending to.

Swift action prevented vast numbers of businesses from going under, protecting jobs, livelihoods, and enabling these firms to be part of the economic recovery

Martin McTague

The lenders had to go through their usual procedure when paying out CBILS and CLBILS, but not for BBLs.

It has made many officials and watchdogs, including MPs on the Public Accounts Committee, nervous about how many companies might have taken out loans fraudulently.

Although banks need to chase down the money if the companies are not paying back, ultimately the taxpayer will reimburse the banks if they cannot recoup all the cash.

One estimate is that around 7.5% of loans might never be recouped due to fraud.

The evaluation of the three loan schemes, published on Tuesday, did not look into fraud. The researchers said others had already looked at the area and it was too early to have any certainty.

The review found that the loans were largely used to fund the operations of the borrowers or boost their reserves.

Federation of Small Businesses national chairman Martin McTague said: “The emergency loans were among the most important lifelines, and the British Business Bank worked collaboratively and effectively with us to make sure there was a guaranteed finance option for even the smallest of businesses.

“As today’s findings demonstrate, this swift action prevented vast numbers of businesses from going under, protecting jobs, livelihoods, and enabling these firms to be part of the economic recovery.”

Chris Wilford at the Confederation of British Industry said: “The Covid loan schemes made a critical difference to businesses of all sizes across every region and nation of the UK.

“Without this vital lifeline, hundreds of thousands of otherwise viable businesses, jobs and livelihoods would have been lost.”