Coronavirus: Treasury backs loans to bigger businesses

Rishi SunakImage source, Getty Images

Loans to all medium-to-large firms will now be included in the government's £330bn coronavirus support package for the economy, the Treasury has said.

All viable companies with a turnover of more than £45m will be able to apply for government-backed support, including those which take in more than £500m.

Schemes for smaller firms and the largest businesses are already in place.

Industry groups welcomed the move.

Businesses with turnovers of more than £500m were not originally going to be eligible for the Coronavirus Large Business Interruption Loan Scheme, which will be launched on Monday.

The scheme, which will be part of £330bn of taxpayer money intended to support the UK economy, will let firms with a turnover of more than £45m apply for up to £25m of finance from banks.

The government will guarantee 80% on those bank loans.

Chancellor Rishi Sunak said: "I want to ensure that no viable business slips through our safety net of support as we help protect jobs and the economy. That is why we are expanding this generous scheme for larger firms.

"This is a national effort and we'll continue to work with the financial services sector to ensure that our £330bn of government support, through loans and guarantees, reaches as many businesses in need as possible."

Business Secretary Alok Sharma said: "Coronavirus has struck a heavy blow against businesses of all sizes across the UK. Expanding this scheme will provide larger firms with the support they need during the pandemic, helping to provide job security to thousands of people and protect our economy."

The scheme is part of government efforts to help keep the UK economy afloat as it is battered by the effects of the coronavirus pandemic.

Smaller businesses may be eligible for the Coronavirus Business Interruption Loan Scheme.

However, the British Chambers of Commerce has said that so far only 2% of UK firms have secured the loans.

And some small businesses, which say they are viable, have been unable to get help.

The government has also admitted that the small business scheme needs to work faster.

Other government initiatives intended to help businesses include the Coronavirus Job Retention Scheme, which covers 80% of workers' pay; tax deferrals; cash grants; and covering the cost of statutory sick pay.

The largest firms may be able to get Bank of England lending under the Covid Corporate Financing Facility.

'Filling a gap'

Business lobby groups welcomed the government announcement of help for medium to large businesses.

Rain Newton-Smith, chief economist at the CBI said: "These measures set out by the chancellor will go a long way to supporting mid-cap companies, some of which are the UK's most important and iconic regional employers.

"This scheme is clearly targeted at helping several thousand mid-tier firms, rather than those already up and running for small and larger businesses."

Adam Marshall, director general of the British Chambers of Commerce, said the changes "fill an important gap in government support, and could make a real difference to medium-sized and larger-firms navigating challenging circumstances".

"It's now crucial to ensure that this enhanced support reaches companies in difficulty as quickly as possible," he said.

Stephen Phipson, Make UK's chief executive, said: "The situation remains fluid and as we assess the detail we will continue to work closely with the Treasury to ensure those companies who need support can turn on the tap when needed."

And Jonathan Geldart, director general of the Institute of Directors, said: "The government deserves credit for showing willingness to continue to adapt its coronavirus response."

Governments and institutions around the world have scrambled to try to cushion economies from the effects of the coronavirus crisis.

For example, last week the European Union agreed a €500bn rescue package for European countries hit hard by the pandemic. In March the IMF announced $50bn (£39bn) of support for countries hit by the coronavirus and the US passed a $2tn disaster aid bill.