Coronavirus: UK government gives businesses £100bn helping hand

UK businesses have benefited from over £100bn ($126bn) in direct and in-direct government support since the COVID-19 pandemic hit, new data shows.

Figures published by the Treasury, HMRC, and the Bank of England show companies have received tens of billions in state-backed loans, grants, and wage support.

As of 7 June, hundreds of thousands of companies across the UK had:

• borrowed £9.5bn through the coronavirus business interruption loan scheme (CBILS), which is 80% guaranteed by the government;

• borrowed £1.5bn through the coronavirus large business interruption loan scheme (CLBILS), which is also 80% guaranteed by the government;

• borrowed £23.7bn through the Bounce Back loan scheme, which is 100% guaranteed by the state;

• received investment worth £55.9m from the Future Fund, which backs startups through convertible loan notes financed by the government;

• claimed £19.6bn to cover the wages of 8.9 million furloughed employees through the government’s job retention scheme.

Elsewhere, data from the Bank of England shows large corporates have raised net £16.1bn through the Covid Corporate Financing Facility, which is also state backed. The Bank of England has approved financing facilities worth £67bn but many lie dormant.

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Deferred VAT payments and business rates holidays for retail businesses add another £32bn to support.

Finally, small businesses, retailers, and hospitality businesses have been handed £10bn in government grants.

The combination of state-backed loans, grants, wage support, rates holidays and VAT deferrals totals £112.45bn.

When self-employed income support is included — which is arguably a personal benefit, rather than corporate, but could support companies — the government has facilitated £119.9bn in support.

The figure is equivalent to around an eighth of the government’s total spending last year and is more than it spends annually on education and defence combined.

The Office for Budget Responsibility estimate that the government will spend £132.5bn this year alone responding to COVID-19.

However, only around £37bn of the £109.9bn figure is direct government spending — the rest takes the form of government loan guarantees, payment holidays, or tax breaks.

Chancellor Rishi Sunak announced what he called an “unprecedented” package of support for businesses in mid-March as the UK went into lockdown, including £330bn in state-backed loans. The job retention scheme was announced days later.

READ MORE: Speed at which UK firms took Bounce Back loans is ‘incredible red flag’

The support programme has so far prevented widespread layoffs and corporate collapses. Figures from the Office for National Statistics show just 1% of businesses have so far gone bust as a result of the pandemic.

However, experts fear state support will only delay a steep recession rather than prevent it. Deutsche Bank warned this week that 2020 is set to be the worst year for the UK economy since 1710. The German bank forecasts GDP will shrink by 11.5%.