Sunak Plans to Extend Recovery Loans for U.K. Businesses
Chancellor of the Exchequer Rishi Sunak plans to extend a program of state-backed loans for U.K. businesses, one of the measures to aid the economy’s recovery from the worst recession in a century.
The Recovery Loan Scheme was due to end Dec. 31 but will now be extended for a further six months, according to a person familiar with the Treasury’s plans who asked not to be named because discussions are still underway. Sunak is set to announce the decision in his budget on Oct. 27, the person said.
Sunak is trying to spur investment and prop up businesses after the recovery hit a weak patch. The economy grew less than expected in August after posting an unexpected drop in gross domestic product in July. That’s cast doubt on whether output will return to pre-pandemic levels this year.
The loans program is one of a handful of carefully-targeted measures Sunak is planning in the spending round this year. The Treasury wants to avoid the sort of major stimulus that might add to alarm at the Bank of England about inflation and prompt more interest rate increases, people familiar with the chancellor’s thinking said earlier this week.
The chancellor unveiled the recovery loans in March in order to help businesses rebuild after the pandemic. Under the program, businesses can borrow as much as 10 million pounds ($13.8 million), with the state backing 80% of the lending. The Treasury said at the time that its end date for new entrants of Dec. 31 was “subject to review.”
While data hasn’t yet been published on how much money has been loaned out in recovery loans, three predecessor state-backed lending programs issued almost 80 billion pounds worth of loans. The British Business Bank, which administers the program, said it intends to release data on the uptake of recovery loans later in the fall.
Mike Cherry, National Chairman of the Federation of Small Businesses, which had called for Sunak to extend the loans plan, said the move “will help firms access finance as they try and manage inflation, staff shortages, spiraling energy costs and supply problems.”
He also called for further measures, including a cut to value added tax on energy bills for small businesses and an exemption for more companies from paying business rates.
While Sunak is acting to shore up businesses, his focus on lending rather than grants also reflects his push to shore up public finances after the government spent some 352 billion pounds ($479 billion) to fight Covid-19 and protect businesses and jobs. He’s said it’s his “sacred duty” to balance the books.
The Treasury declined to comment on “speculation,” saying in a statement that its loan programs have helped 1.6 million businesses with the finance they needed “throughout the pandemic.”
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