Sunak ready to u-turn on 100% loan guarantees
Rishi Sunak: said on Monday he was not persuaded
Chancellor Rishi Sunak is expected to revamp his coronavirus support scheme to offer 100% guarantees on loans to smaller UK businesses, amid complaints that the current programme is not working.
The coronavirus business interruption loan scheme (CBILS) offers loans of up to £5m to companies with an annual turnover of up to £45m. The government guarantees 80% of each loan.
However, firms say they have struggled to meet banks’ complex demands as lenders fear they are taking on too much risk.
The Bank of England governor Andrew Bailey, Labour shadow business secretary Ed Miliband and former chancellor George Osborne have called for the 100% government cover in order to calm bankers’ concerns.
Mr Sunak is now looking at providing these guarantees to the smallest businesses, according to the Financial Times.
The Treasury said the whole package of lending schemes is constantly under review, although the 80% limit would remain under the CBILS.
The FT said a new programme would target a million of the smallest businesses in the UK, which typically have only a handful of staff.
On Monday Mr Sunak said he was “not persuaded” by the idea of a 100% guarantee, arguing that while other countries were offering it, they were not providing some of the schemes the UK had devised.
Alison Thewliss: fundamental flaws (pic: Terry Murden)
Federation of Small Businesses (FSB) National Chairman Mike Cherry said the u-turn was welcome but was only “one piece of the puzzle”.
He said: “The average value of a CBILS loan currently stands at more than £170,000. The vast majority of small firms – more than 95% of which are micro businesses or sole traders – are not seeking loans of anywhere near that size.
SNP Shadow Chancellor Alison Thewliss said: “If the Tory government finally performs a U-turn then that is welcome – but we must be clear this small change will not fix the fundamental flaws in the UK government’s scheme, which requires comprehensive reform.
“After weeks of waiting, only a tiny fraction of the UK’s small and medium-sized businesses have received any financial support from this scheme.
“Millions of businesses have received absolutely nothing – including the majority of those that have expressed an interest.
“For many businesses, the UK government’s scheme isn’t working and doesn’t meet their needs. Many smaller businesses simply cannot afford to take on loans that push them into debt through no fault of their own – while others have applied for help but have been rejected.”
Grant support ‘too slow’
One small business owner, Michel Lumsden of Pure Spa and Beauty, says the delivery of small business grants in Scotland is too slow compared to those issued in England and has been delayed because of the late changes made to the scheme.
In a letter to MSPs, he said: “Unfortunately the changes to the retail, leisure and hospitality grants implemented by the Scottish Government have made the administering of the £25K grants by councils unnecessarily slow. Our businesses cannot afford such unnecessary delays caused by bureaucracy.”
Scottish Conservative shadow finance secretary Donald Cameron said: “It is now beyond doubt that the SNP’s package of support for small businesses falls well short for far too many.
“This is another hardworking business owner whose properties would fare far better if they were based south of the border.
“That’s not an acceptable situation for the Scottish Government to create.”