U.K.’s Sunak Expands Coronavirus Loan Program to Help More Firms
U.K.’s Sunak Expands Coronavirus Loan Program to Help More Firms
(Bloomberg) -- Chancellor of the Exchequer Rishi Sunak on Friday will expand the U.K.’s program of loan guarantees for companies hit by the coronavirus outbreak, as he revealed firms have already benefited to the tune of more than 3.5 billion pounds ($4.3 billion).
Responding to criticism that earlier measures omitted medium sized companies, Sunak is set to announce a new loan guarantee plan to benefit firms with an annual turnover of between 45 million pounds and 500 million pounds. He’ll also unveil changes to the program for small companies to address complaints that they were being forced to apply for loans on commercial terms before they could access the emergency funding.
Bloombreg Economics Primer: Pandemic Will Push U.K. Into Deep Recession
Treasury officials are scrambling to save as many viable companies and jobs as they can to ensure the economy is well-placed to rebound from the economic downturn that’s expected to result from the pandemic. Sunak in March laid out four packages of measures to help companies and their employees weather the economic fallout and the government lockdown, and he’s now trying to perfect those measures.
“This is a national effort, and we’ll continue to work with the financial services sector to ensure that the 330 billion pounds of government support, through loans and guarantees, reaches as many businesses in need as possible,” Sunak said late Thursday in a statement.
Billions Earmarked
Also on Friday, the Department for Transport announced 400 million pounds of funding to keep bus services running during the pandemic, ensuring doctors, nurses and other key workers can get to work. That included 167 million pounds of new funding that’s contingent on operators maintaining a certain level of service, as well as a guarantee that 200 million pounds of funding linked to fuel usage is still paid out, despite reduced services.
Sunak’s total plans to date amount to more than 60 billion pounds ($75 billion) of direct aid – bigger than during the financial crisis a decade ago -- as well as 330 billion pounds of loan guarantees.
Some 1.9 billion pounds of finance has already been provided to large companies under one guarantee program operated by the Bank of England, according to the Treasury. A further 1.6 billion pounds is due to go out by Monday.
Under the guarantee program for smaller firms, some 90 million pounds worth of loans to nearly 1,000 companies has been approved by commercial banks since it became operational last week.
Sunak is now extending the scope of that plan -- under which the government shoulders interest payments and fees for a year -- to include all small companies affected by the outbreak, and not just those that couldn’t obtain a loan on commercial terms. He also barred lenders from requesting personal guarantees for loans under 250,000 pounds, responding to another criticism that some banks required directors to personally guarantee any borrowings.
The program for mid-sized companies is modeled on the one for smaller ones, but the government won’t pay interest and fees.
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