Bank of England lending to large firms surges to £7.6bn

Bank of England lending to large firms has surged to £7.6 billion as more corporate giants have sought support to stay afloat through the coronavirus crisis.

Sam Woods, deputy governor of the central bank, told the Treasury Select Committee on Wednesday that borrowing from its Covid Corporate Financing Facility (CCFF) has jumped from £5.5 billion last week.

It comes as leaders in the finance sector told UK politicians that start-ups and fast-growing financial firms were facing particular difficulty in accessing support from the Treasury and the central bank.

Earlier on Wednesday, finance trade association UK Finance revealed that 6,020 loans, totalling over £1.1 billion, have also been handed out to smaller UK firms as part of the Coronavirus Business Interruption Loan Scheme (CBILS).

However, less than a quarter of firms which have formally applied for the loans have secured cash support.

Stephen Jones, chief executive officer of UK Finance, told the select committee that countries where governments have fully guaranteed emergency loans, rather than requiring banks to take on some risk, have been able to support small firms much faster.

Under the UK scheme, the Government has taken an 80% guarantee, with banks taking on the rest of the risk.

Stephen Haddrill, director general of the Finance and Leasing Association, told the Treasury Select Committee that credit needs to reach businesses faster in response to the pandemic.

He said: “I think the supply of credit is so fundamental it has to be sped up and the supply chain of credit has got to be shortened.

“At the moment, you have Bank of England support going to the main banks, who might pass it on to the non-banks, who then pass it on to their customers.

“Let’s short-circuit that and try and get that Bank of England or British Business Bank support directly to customers.”

Mr Jones also said the need for cash support provided banks with a chance to repay “ills of the past”.

He said: “The banking sector recognises that it needs to be the transmission mechanism for the solution in this crisis and has an opportunity to really make good for some of the ills of the past.”

Mr Jones told the committee he expects UK banks to make losses during the coronavirus crisis.

He said: “I think with the forbearance being taken, extension of risk appetite and scenarios that the Office for Budget Responsibility is painting of economic contraction, I find it very hard to believe that the banks will profit from this crisis.

“I think it’s a question of how significant will the losses be, but I would point to the very fast action by regulators to release capital buffers to support the economy at a time of crisis to ensure that the maximum amount of lending can be made by banks in the circumstances.”