U.K.’s Virus Loan Program to Be Opened to More Indebted Firms
(Bloomberg) -- The U.K. will make more heavily indebted companies eligible for a 12.5 billion-pound ($16 billion) program of financial assistance during the coronavirus pandemic.
Businesses with high levels of debt and accumulated losses will be each able to apply for as much as 5 million pounds in government loans after the government relaxed a rule that excluded firms in financial difficulties, the Treasury said in a statement on Thursday.
The decision is aimed at keeping more firms and jobs afloat as the economy claws its way out of recession. But it may also raise concerns over how much of the loans will ultimately be paid back, something that could worsen the already precarious position of the U.K.’s public finances. It will also open the government up to criticism for using taxpayer money to keep non-viable firms in business during the crisis.
The government said European Union state aid rules had previously barred so-called “undertakings in difficulty” from accessing the government’s Coronavirus Business Interruption Loan Scheme. Those rules have now been relaxed “as a result of U.K. Government and industry lobbying,” the Treasury said in a statement.
The government has so far paid out 12.5 billion pounds in CBILs to more than 57,000 businesses as part of a wider support program costing almost 50 billion pounds.
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