The British government said up to £2.09bn of emergency Covid-19 loans issued to businesses at the height of the pandemic, backed by a government loan guarantee scheme, have defaulted.
One in 12 businesses that received government-backed loans during the pandemic failed to pay back their debt, as “8% of all facilities have been subject to a default”, the government said.
This leaves UK taxpayers liable to pick up the tab for businesses that were unable to pay back the emergency loans.
British businesses have so far received £77.1bn of pandemic-related government-backed loans, through more than 1.6 million drawn loan facilities, the government said in a statement yesterday.
The British Business Bank has so far settled £420mln of claims made by lenders under the loan guarantee scheme, the UK Department for Business, Energy & Industrial Strategy said.
Barclays PLC (LSE:BARC), Metro Bank PLC (LSE:MTRO) and Starling Bank made the highest volume of settlements under the government loan guarantee scheme.
The total volume of claims submitted under the loan guarantee scheme so far stands at £1.67bn, according to the data, where the British Business Bank is awaiting and processing invoices for claims and running relevant checks.
The Covid-19 loan guarantee programme involved three schemes designed to help businesses weather the impact of Covid-19, which were set up at the height of the pandemic in the first half of 2020.
These included the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, and the Bounce Back Loan Scheme.
Of all the Covid-19 loan schemes, the government said 62,397 facilities defaulted, representing 3.8% of the total number of loans issued and an outstanding balance of £2.09bn.
The Bounce Back Loan Scheme was hit the hardest by defaults, as 4% of companies failed to pay back their loans, which have not yet progressed to claims by lenders.
This amounted to 61,475 of loan facilities issued under that one scheme, which are unable to be paid back, representing an outstanding balance of £1.89bn.
The Coronavirus Business Interruption Loan Scheme had 922 facility defaults, representing 0.9% of the loan guarantees made under that scheme, and an outstanding balance of £200mln.
None of the government-backed loans issued to large businesses under the Coronavirus Large Business Interruption Loan Scheme has so far defaulted, the government said.
Lenders authorised under the government's loan guarantee schemes detected 62,380 cases of suspected attempted fraud, representing £2.2bn of potential loans.
About 18,000 loan applications made under the bounce back scheme and 100 loans under the business interruption scheme for small businesses were suspected to be fraudulent.
The government said it will report the number of defaults that led to full-blown claims in the later life-cycle stage of reporting.
Yesterday's data compiled information that was provided to the British Business Bank’s lender portal, as of the end of March.