ao link
0 £0.00
This item was added to your basket
Credit Strategy homepage
LinkedIn
Twitter
Intelligence, Insight and community for responsible professionals in credit

Over 300,000 firms on emergency loans, but “unsustainable debt” levels could hit £100bn

More than 300,000 businesses have now benefitted from £14bn in government-backed loans, according to Treasury figures, but a trade body has warned that unsustainable debt across private firms could surge beyond £100bn.

Announcing the extension of the furlough scheme until October, chancellor Rishi Sunak also released latest statistics on Monday (May 12), revealing approval totals for government-guaranteed business loans.

 

They show the following:

* 268,000 Bounce Back Loans worth £8.3bn have been approved;

* 36,000 loans worth more than £6bn have been approved through the Coronavirus Business Interruption Loan Scheme (CBILS);

* £359m of loans, through CBILS for larger firms, have been granted.

 

Although hundreds of thousands of businesses have been given a lifeline through such schemes, total figures on applications also released by the Treasury, show that over 130,000 businesses may still be limbo, either because their application is yet to be decided – or has been refused.

 

And while approvals for bounce back loans have flowed fast, the pace has been slower on interruption loans for SMEs. The government’s own release today did, however, include reactions from business trade bodies emphasising how vital these support measures have been.

 

Mike Cherry, national chairman of the Federation of Small Businesses, said the Job Retention Scheme has been a lifeline in helping small employers keep their staff in work. “Small employers have told us that part-time furloughing will help them recover from this crisis and it is welcome that new flexibility is announced today,” he added.

 

Adam Marshall, director general of the British Chambers of Commerce, said: “The chancellor is once again listening to what we’ve been saying, and the changes planned will help businesses bring their people back to work through a part-time furlough scheme.”

 

Dame Carolyn Fairbairn, director-general of the CBI, said that extending the furlough to avoid a June cliff-edge will “protect millions of jobs”.

 

Loan scheme approvals

 

Loan type

Total approvals

Combined value of approvals

Total applications

 

Bounce Back Loans

268,173

£8.378bn

363,646

CBILS

35,919

£6.094bn

71,316

CBILS (large)

59

£359m

358

 

 

Building unsustainable debt?
While business lobby groups supported the furlough extension, a separate trade body has warned that private businesses are building up unsustainable debt levels – which could reach beyond £100bn.

 

In a letter to Bank of England governor Andrew Bailey, TheCityUK, which represents UK-based professional services firms, shared analysis claiming that unsustainable debt held by UK private non-financial corporations (PNFCs) could reach between £90bn and £105bn.

 

Preliminary work by TheCityUK’s Recapitalisation Group – which brings together leaders from across the financial and related professional services industry – suggests debt levels could reach this level by March 2021.

 

It also estimates that of the total, CBILS lending could contribute £10bn to £20bn. TheCityUK warns in its letter that such debt could inhibit employment, research and development, investment and economic recovery. It added that firms will likely need to raise new equity and/or restructure debt.

 

Miles Celic, chief executive of TheCityUK, said: “Businesses have been put into suspended animation until they can safely reopen. This was absolutely the right thing to do, but the economy will need to be reawakened as part of its process of recovery.”

 

TheCityUK’s Recapitalisation Group is working with businesses and the government to explore options to recapitalise UK SMEs, and resolve debt by optimising the availability of capital

 

 

Please login to continue reading this article.

Not a member?

Become a member

FREE registration. No credit card required

Register now
  • Stay up-to-date with industry news and appointments
  • Hear about events first
  • Read 1 free Premium article per month

Become a premium member

From as little as £3.48 per week

Become Premium
  • All the perks of a standard member plus:
  • Access to the entire Credit Strategy website
  • 12 months subscription to Credit Strategy Magazine
  • 25% discount to all conferences
  • Exclusive access to Premium Member only roundtables
  • 50% off award entry fees

GET THE LATEST INDUSTRY NEWS STRAIGHT TO YOUR INBOX

READ NEXT

Phillips & Cohen launches new data management platform

Phillips & Cohen launches new data management platform

Women in Credit 2021 shortlist confirmed

Women in Credit 2021 shortlist confirmed

FCA action taken against debt packagers

FCA action taken against debt packagers

Upcoming events

Credit Strategy
LinkedIn page

Member of

Did you find our website useful?

Thank you for your input

Thank you for your feedback

creditstrategy.co.uk – an online news and information service for the UK’s commercial and consumer credit industry. creditstrategy.co.uk is published by Shard Financial Media Limited, registered in England & Wales as 5481132, Axe & Bottle Court, 70 Newcomen St, London, SE1 1YT. All rights reserved. Credit Strategy is committed to diversity in the workplace. @ Copyright Shard Media Group