East Riding businesses get hundreds of millions of pounds in bounce back loans
Businesses in the East Riding of Yorkshire’s constituencies have received hundreds of millions of pounds through one of the Government’s main coronavirus loan schemes to help struggling firms.
But suspected fraud and inability to repay the borrowed money could cost taxpayers across the UK tens of billions, an official report has warned.
Companies in the East Riding of Yorkshire’s five parliamentary constituencies had received 8,151 loans worth £231.4 million through the Bounce Back Loan Scheme by October 4, the latest government-owned British Business Bank figures show.
The loan scheme started in April and helps small and medium-sized businesses hit by the pandemic to borrow between £2,000 and £50,000, capped at 25% of their turnover.
The Treasury backs the loans, which are handed out by commercial lenders, and borrowers do not have to pay fees or interest for the first year.
But a report by the National Audit Office, the UK’s public spending watchdog, warned the Government could face huge losses due to fraudulent claims and firms being unable to repay.
The British Business Bank – which delivers the scheme – and the Department for Business, Energy and Industrial Strategy estimate that 35% to 60% of borrowers could fail to repay the money.
The NAO said this could lead to a maximum of £26 billion in losses if lenders pay out £43 billion by November 4, although it warned the estimates are “highly uncertain”.
The deadline for applications has been extended to the end of November.
Gareth Davies, head of the NAO, said the Government had acted decisively to get cash into businesses’ hands “as quickly as possible”.
“Unfortunately, the cost to the taxpayer has the potential to be very high, if the estimated losses turn out to be correct,” he added.
“Government will need to ensure that robust debt collection and fraud investigation arrangements are in place to minimise the impact of these potential losses to the public purse.”
The House of Commons Public Accounts Committee, which oversees government spending, will hear evidence about the scheme at a hearing on November 5.
A Government spokesman said the NAO report showed that its loan schemes “have provided a lifeline to thousands of businesses across the UK”.