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Applications for UK government-backed loans set to soar

With the financial district of the City of London plus the Shard in the distance, local, football players kick a ball around in Ruskin Park, Herne Hill, on 19th November 2020, in Lambeth, London, England. (Photo by Richard Baker / In Pictures via Getty Images)
According to data from British business finance lender Market Finance, companies across the nation have only £3,150 of their Bounce Back Loan remaining (from a total £50,000). Photo: Richard Baker / In Pictures via Getty Images

Demand for government-backed loans from UK businesses is set to soar, new research has revealed, as funds continue to run low and cash flow dries up.

According to data from British business finance lender Market Finance, companies across the nation have only £3,150 ($4,192) of their Bounce Back Loan remaining (from a total £50,000). It estimates that this amount will see firms through to the end of this week.

The insights also showed that some 84% of firms will apply for larger Coronavirus Business Interruption Loan Scheme (CBILS) loans, with only 27% of small businesses surveyed saying they are certain they will survive to see 2021. This was based on their current cash balances and anticipated a reduction in revenue over the winter months.

Others have admitted that they are in need of a cash injection of £50,000 to see them through to the end of the year.

Research findings were based on a survey of 5,000 UK companies, who are employers with a minimum turnover of £250,000, conducted in November 2020 (after the announcement of the second lockdown).

Since the announcement of the new lockdown measures, some 84% of businesses said they will be applying for CBILS loans. They indicated this would be used to protect them over prolonged lockdown measures and in anticipation of more bills, taxes or duties to pay.

In addition to this, more businesses know they can refinance their Bounce Back Loan with a CBILS loan - up from 68% two months ago to 83% today.

READ MORE: Chancellor to overhaul £330bn coronavirus business loan scheme after backlash

Anil Stocker, chief executive of MarketFinance, said: “The stop-start government announcements on lockdowns haven’t helped UK businesses. However, they continue to fight on and will, naturally, require more funds to bolster them through a tricky winter period.

“Looking ahead, ultimately, it will be the private sector which will enable the Chancellor to get the country’s finances back under control, so business leaders will be looking for some pro-growth, pro-enterprise stimulus measures in time to come.”

The research also showed that a fifth of small businesses are now waiting longer than 3 months to be paid, MarketFinance said, and £27,000 is still outstanding for work done before the first lockdown.

Two in five businesses (42%) are still waiting to be paid for work completed since the first lockdown. In June 2020 they were, on average, waiting for £148,917 which came down to £33,906 in September.

Businesses in Wales and those in the leisure, marketing and telecoms sectors have been the hardest hit, in terms of longer waiting times to be paid.

READ MORE: £20bn lent to businesses under 'Bounce Back' scheme amid default fears

Stocker added: “We are witnessing a cash vacuum in the economy. Businesses are waiting longer to get paid and in turn are holding out on payments they owe. They are in desperate need of funds and support from the government. A well-oiled engine will keep the economy pumping and small business alive.”

Last week Chancellor Rishi Sunak outlined the onset of the economic emergency facing the UK at the Spending Review to the Commons.

He said the Office for Budget Responsibility (OBR) did not expect the economy to return to its pre-crisis levels until the end of 2022 and the damage was likely to last.

An estimated 1.3 million public sector workers will see their pay frozen in 2021-2022, the Chancellor said at the time, as unemployment is expected to reach 7.5% next spring, with 2.6 million people out of work.

Watch: What is the Bounce Back Loan scheme?