The pace at which loans are being doled out to firms struggling as a result of the coronavirus pandemic under government-backed schemes slowed markedly over the past week, as deadlines for the programmes approach.
Just 19 businesses applied for support in the week to 16 August under the coronavirus large business interruption loan scheme (CLBILS), which offers 80% government-backed loans to larger companies.
Some £3.5bn ($4.6bn) has now been handed out on the scheme, up from the £3.4bn total the week before. The scheme is due to come to an end on 20 October.
Meanwhile, less than 900 firms applied for support from the coronavirus business interruption loan scheme (CBILS), which is targeted at small and medium-sized businesses. The scheme is due to end on 30 September.
That marks only the second week since the scheme was launched in May that fewer than 1,000 businesses have applied for a loan under the scheme.
Some £13.68bn in loans have been offered by financial institutions as part of the scheme, which is just a 2% increase on the week before.
Even the hugely popular “bounce back” scheme, which allows eligible small businesses to access loans of up to £50,000 backed by a 100% government guarantee, saw a slowdown in applications.
Around 17,600 firms applied for bounce back loans in the past week, the first time it has received fewer than 20,000 applications, and down markedly from the tens of thousands of applications it was receiving just weeks ago.
Some £35.47bn has now been handed out under the bounce back scheme, representing a 1.5% increase on the total from the previous week. The scheme is due to come to an end on 4 November.
Overall, more than £52bn has now been lent to firms under government-backed loan schemes.
The Treasury has faced pressure to extend the deadlines for the scheme to further buttress the UK economy, particularly due to fears that lending to small businesses would fall off a cliff after government guarantees are withdrawn.
The slowdown in the number of applications, however, will likely give the Treasury confidence to taper off its support measures.
“We’ve backed businesses from the start of the outbreak — paying billions in government-backed loans and grants, protecting jobs by paying workers’ wages and deferring billions of pounds in tax,” said a Treasury spokesperson.
“But we’ve been clear these schemes are temporary and it would not be sustainable for them to continue indefinitely,” they said, noting that other government support measures would continue.
UK Finance, the trade association for the UK banking sector, said on Tuesday that the bounce back scheme “continues to be a vital element” of support, noting that more than 1.2 million small firms had received support under the scheme.
But concerns have been raised about the speed at which firms are borrowing under the scheme, with analysts warning it could lead to widespread defaults as companies collapse under the weight of their debt.
The Office for Budget Responsibility has predicted that as many as 40% of these government-backed loans could default, leaving the taxpayer on the hook for tens of billions.
Business lending overall is expected to grow by more than 14% in 2020, according to economic forecasters at the EY Item Club, significantly more than the 2% increase seen in 2019.