UK Facing Shortcomings in Delivering Emergency Funding to Businesses

UK Business Funding

Countries across Europe have been distributing emergency funding to various businesses in an attempt to mitigate the economic repercussions of the novel Coronavirus pandemic. However, the United Kingdom appears to be struggling to keep up with its European peers in rescuing its businesses from downfall due to certain shortcomings in its COVID-19 loan schemes.

As per a report by The Guardian, experts have asserted that Britain is lagging behind in providing financial assistance to its vulnerable businesses due to factors linked to “borrowing trends, the nature of Britain’s financial system, and the UK’s relationship with government spending”. 

While the Boris Johnson government has announced state-backed loans of at least £330 billion – the largest in the country’s history – experts have asserted that other European countries such as France and Germany are in benefit due to better experience from past instances in dispersing state-backed financial assistance to their businesses.

When the UK’s CBILS scheme guarantees 80% of government cover on losses, France and Germany launched schemes for business loans with 90% government assurance. Certain plans with a 100% guarantee for companies in trouble have also been announced by these governments. Furthermore, the British Business Bank lacks experience in managing mega-size programs such as CBILS and bounce-back loans. Reportedly, the bank has stepped up it’s staffing as it has not been able to manage surging demand for emergency loans.

The CBILS, launched by the government on March 23. provides financial support to smaller businesses (SMEs) affect by the COVID-19 crisis across the country. It offers loans of up to £5 million, available for small companies with a turnover of less than £45 million. Due to certain altercations over terms of the scheme, the Treasury introduced two new schemes – CLBIL for larger firms and a fast-tracked bounce-back loan scheme. The Bounce-Back Loan Scheme (BBLS) allows small and medium-sized businesses to access finances between £2,000 and up to 25% of their turnover swiftly during the coronavirus outbreak. The maximum loan allowed by the scheme is £50,000. Chancellor Rishi Sunak introduced the CLBILS scheme las month to support large companies with sales of between £45 million and £250 million.

In the meantime, the British government Treasury on Monday extended the size of loans up to £200 million from the CLBILS(Coronavirus Large Business Interruption Loan Scheme) for larger businesses affected by the pandemic ramifications. Previously, companies were able to receive a maximum payout of £50 million. A statement issued by the UK government on the matter stated that the expanded loans will be made available from May 26.

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