Wednesday, October 21, 2020
UK Business News > Blog > Politics > Taxpayer Guaranteed Nearly £70bn in Loans

Taxpayer Guaranteed Nearly £70bn in Loans

Taxpayer Guaranteed Nearly £70bn in Loans.
The taxpayer will have guaranteed nearly £70bn in loans to UK businesses by March 2021, according to new industry estimates. But the expected bill for bad loans to UK firms has fallen from £30bn to “only” £20bn, according to TheCityUK.

The group says that better-than-expected economic growth has seen cost estimates of government-guaranteed loans shrink. Firms’ appetite to take on new debt has also been hit by Covid-19, it says.

Research from the banking industry lobby group also suggests that the toll on jobs from businesses going bust will be significantly lower: it has halved its initial three million job loss prediction to one and a half million. However, it says that the number of businesses likely to find it difficult to repay their loans has risen from 30% to nearly 40%.

The research is part of a campaign on the part of the lending industry to encourage the government to convert “unrepayable” debt to a student loans-type scheme, where Covid-19 related loans could be deferred until a business is back on a more secure financial footing.

The downward direction of bad loans is likely to confirm government instincts to avoid deferring these debt repayments.

That would be a mistake, according to the lending industry: “The expected high levels of unsustainable debt will continue to be a heavy drag on economic recovery.”

Or, as insiders put it: “We are in danger of creating a new generation of zombie companies who cannot grow from under their pile of debt.”

TheCityUK was also keen to stress that at the time their data was collected, the economy was rebounding as coronavirus-related restrictions were eased.

It warned that the impact of recent new directives and the upcoming end of the government’s furlough scheme could see the pile of “unrepayable” debt start to grow again.

You might also like