Nearly 400 firms have called for Rishi Sunak to scrap repayments on Government-backed loans in the Budget this week, to avoid an uptick of insolvencies.

In an open letter last week, 388 business leaders urged the Chancellor to write off debt accumulated by small and medium-sized firms that took on business interruption loans and bounce back loans amid the pandemic.

It comes despite Mr Sunak earlier this month extending the repayment time for the 1.4m small firms who took on bounce back loans to 10 years, rather than six, reducing monthly payments which are due to start in May. Under the new plans businesses can also choose to make interest-only payments for six months, or pause repayments for up to six months.

Some £45bn of relief has been handed out to small firms in a bid to try and keep them afloat through coronavirus restrictions.

Signatories of the letter said these measures only “delay the inevitable”, with millions of businesses on the brink of going bust.

“SMEs need a lifeline and writing off Government-backed loans would give companies the best possible opportunity to keep trading long into the future,” it read.

“Many businesses took advantage of the Government’s economic support packages in 2020 with the understanding that lockdown restrictions would be a short-term inconvenience for their business, and they would be back to “business as usual” sooner rather than later. However, almost 12 months on lockdown restrictions have remained in place intermittently throughout, and with the benefit of hindsight, many of these businesses would reconsider their options.”

It estimates the cost of writing off loan repayments would cost the Treasury roughly £68bn.

The Federation of Small Businesses (FSB) earlier predicted at least 250,000 small firms may collapse over the next year without further help. Meanwhile, recent figures from Begbies Traynor’s Real Business Rescue found more than 600,000 small businesses are on the brink.

Founder of charter airline firm Jota Aviation Simon Dolan, who led the “Fighting Back For Business” campaign letter said: “The first step towards a thriving economy post-coronavirus hinges on businesses still being open, and ensuring they are not weighed down by looming loan repayments will be vital in countering the possibility of unparalleled insolvency figures.”

Mr Dolan also leads the ‘Keep Britain Free’ movement which claims to hold the Government to account over lockdown.