Taxpayers left with £421m bill after one in 12 firms default on Covid loans
Taxpayers have been left to foot a £421m bill to cover soured Covid debts, after one in 12 businesses defaulted on state-backed emergency loans distributed at the height of the pandemic, official figures reveal.
In thefirst set of figures detailing the performance of government-backed loans offered to struggling firms during the outbreak, the Department for Business, Energy and Industrial Strategy said about 8% of 1.6m borrowers – roughly 130,000 – failed to repay their debts as of March this year.
The bulk of the claims – around £352m – were made for bounce back loans, the popular scheme which accounted for £47bn of the £77bn total lent to businesses through the programme.
High street banks and online lenders, which distributed the loans on behalf of the government, subsequently claimed a combined £421m of taxpayer cash to cover the defaults.
About 18,000 of the 1.5m bounce back loans claimed were flagged for suspected fraud by lenders, though no updated estimates were provided on the potential cost to the government. It has previously been estimated that fraud losses could top £4.9bn, though more recent estimates from PwC, the accountancy firm hired by the government, reduced that figure to £3.5bn.
“We are still early in the life of the schemes and in the lending cycle, so it is too soon to accurately assess levels of fraud and credit losses,” the business department said.
Defaults and fraud estimates, which are collected by the British Business Bank, are expected to change as more debts become due, with many firms having taken advantage of a programme allowing them to extend their loans over 10 years.
Bounce back loans, which were 100% government backed, were distributed by 28 high street banks and other lenders, with
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