Coronavirus: Loans backed by government and furlough bill exceed £60bn

Reopening of economy sparks hopes that businesses will recover

Four government loan schemes designed to support businesses during the Covid-19 pandemic have lent out over £40bn, and 1.1 million businesses have claimed a total of £22.9bn under the furlough scheme.

The Treasury revealed that bounce-back loans from banks to firms reached £28.1bn up to 21 June for 921,229 businesses, from 1.12 million applicants. The loans are 100 per cent guaranteed by the taxpayer.

Some 9.2 million jobs were covered by the furlough scheme, operated by HM Revenue and Customs, it added.

A separate coronavirus business interruption loan scheme (CBILS), which was launched before the bounce-back scheme, reached £10.53bn for 50,482 businesses, which are 80 per cent guaranteed by the taxpayer.

The coronavirus large business interruption loan scheme (CLBILS), for bigger firms that are unable to access the Bank of England’s own lending scheme, lent £2.1bn to 315 firms, and a further £236.2m in loans were given out as part of the government’s Future Fund.

The furlough scheme closed to new applications earlier this month, and employers will need to start making compulsory contributions to the scheme from August to cover National Insurance and pensions contributions.

The scheme is due to finish at the end of October, and businesses and unions have urged the government to lay out plans for avoiding mass unemployment later in the year.

Businesses have been forced to rely on government handouts to stay open during the crisis, as a nationwide lockdown was imposed to stop the spread of Covid-19, with staff sent home and doors shut to the public.

The chancellor, Rishi Sunak, has promised to do whatever it takes to support the economy through the lockdown period.

The bounce-back loan scheme (BBLS) has proved the most popular, primarily because the level of checks is minimal and banks, which are lending the cash, feel secure in the knowledge that any default will be covered by the government.

Businesses are allowed to take a loan of up to £50,000, with a 100 per cent government guarantee – but there are concerns that the scale of the defaults could be substantial.

Non-essential shops in England were allowed to reopen last week and Boris Johnson announced on Tuesday that pubs, museums, cinemas and a number of other venues are allowed to reopen from 4 July.

Ministers are hoping that the reopenings, alongside a relaxation of social distancing rules from two metres to one metre, will help the economy recover.

Additional reporting by PA