Scots firms pocket hundreds of millions of pounds from Covid loan scheme

Businesses across Scotland have collectively received hundreds of millions of pounds through one of the UK Government’s main coronavirus loan schemes.

Scottish firms to have used the scheme include Edinburgh seafood restaurant Ondine. Picture: Lisa Ferguson.
Scottish firms to have used the scheme include Edinburgh seafood restaurant Ondine. Picture: Lisa Ferguson.

But it comes amid an official report warning that suspected fraud and inability to repay the borrowed cash could cost taxpayers across the UK tens of billions of pounds.

New figures from the British Business Bank – which is owned by the UK Government – have revealed take-up of the Bounce Back Loan Scheme (BBLS), which enabled SMEs to borrow between £2,000 and up to 25 per cent of their turnover, up to £50,000.

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The Treasury backs the loans, which are handed out by commercial lenders such as Lloyds Bank and Royal Bank of Scotland, and borrowers don’t need to pay fees or interest for the first year. The British Business Bank has found that across the UK, 1.3 million payments worth £38 billion had been issued through the BBLS by October 4.

Use of the scheme in Scotland until that date included:

Companies in Edinburgh’s five parliamentary constituencies had received 7,175 loans worth £216.2 million; Companies in Highland’s three parliamentary constituencies had received 4,156 loans worth £110.1m; Companies in Aberdeenshire’s three parliamentary constituencies had received 3,743 loans worth £108.6m; Companies in Stirling’s parliamentary constituency had received 1,571 loans worth £46.7m; Companies in Dundee’s two parliamentary constituencies had received 2,415 loans worth £70.8m.

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Scottish firms to have used the scheme include Edinburgh seafood restaurant Ondine, which secured funds via Barclays. The hospitality business said in June the £50,000 loan would let it meet business critical costs while it remained closed to diners during the lockdown.

But a report by the National Audit Office (NAO), the UK’s public spending watchdog, warned the UK 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 up to 60 per cent of borrowers could fail to repay.

The NAO said this could lead to a maximum of £26bn in losses if lenders pay out £43bn by November 4, although it warned the estimates are “highly uncertain”. The deadline for applications has been extended to the end of November.

Robust

Gareth Davies, head of the NAO, said the UK Government had acted decisively to get cash into firms’ hands “as quickly as possible”. He said: “Unfortunately, the cost to the taxpayer has the potential to be very high … 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 UK Government spokesman said the NAO report showed that its loan schemes “have provided a lifeline to thousands of businesses across the UK”.

He said: “We targeted this support to help those who need it most as quickly as possible and we won’t apologise for this.

“We’ve looked to minimise fraud – with lenders implementing a range of protections including anti-money laundering and customer checks, as well as transaction monitoring controls. Any fraudulent applications can be criminally prosecuted for which penalties include imprisonment or a fine – or both.”

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