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Coronavirus Business Interruption Loan Scheme

Volume 803: debated on Tuesday 12 May 2020


Asked by

To ask Her Majesty’s Government what assessment they have made of the operation of the Coronavirus Business Interruption Loan Scheme for small- and medium-sized businesses.

The Question was considered in a Virtual Proceeding via video call.

My Lords, as of 6 May, loans worth over £5.5 billion were issued under the Coronavirus Business Interruption Loan Scheme for 33,812 businesses. The bounce-back loan scheme was launched on Monday 4 May, and nearly 160,000 loans, worth almost £5 billion, were approved in the first three days of the scheme’s operation. The Government continue to monitor the schemes and to work with the financial services sector to ensure that companies receive the full benefit from the support available.

Does the Minister accept that, although the number of loans is quite large, the number of SMEs receiving them as a proportion of the whole is relatively small? Is he concerned that, under the two existing schemes, banks are primarily lending only to people to whom they would have lent anyway in normal times? This is particularly hitting the hospitality and retail sectors.

The noble Lord is right that only a relatively small proportion of the total number of SMEs have applied for or received loans. However, it is important to remember that not all businesses want loans, and of course other government support schemes are also available to help them through the crisis.

My Lords, the Government have to ease people back to work safely, increase the flow of funding to SMEs and avoid scarring unemployment. SMEs employ 60% of private sector workers, and many are now critically dependent on both government-backed loans and job retention schemes. Withdrawing these measures too soon when their very purpose is to keep jobs and businesses going will undermine them. When will the Government publish their road map for phasing out the CBILS and job retention schemes, and what impact will that have on structural employment and the longer-term stimulus package for SMEs?

The Government will continue to monitor and review all their business support schemes and make changes where necessary. I am sure that the noble Baroness has noticed that this afternoon the Chancellor will be making a Statement in the House of Commons on the job retention scheme and the Government’s wider economic coronavirus support package. I am sure that she will get more information then.

My Lords, under the bounce-back scheme, interest is charged at 2.5%, but under CBILS lenders are charging considerably more. At the same time, banks are paying savers interest of less than 1%. My noble friend Lord Razzall talked about the small number of SMEs taking up loans under the scheme. Does the Minister agree that banks have a different idea of “We are all in it together” compared with the rest of the population?

No, I do not accept that criticism of the banks. They have worked extremely hard, as have the British Business Bank and the department, to try to get as many loans approved as possible for businesses that want them. The Government are—certainly through the bounce-back scheme—supporting 100% of the amount of those loans. Therefore, a lot of work is going on in all the sectors to try to help the businesses that require support.

My Lords, I strongly commend the Government for their support for business during this crisis. Can my noble friend give more detail of the operation of both the business interruption scheme and the bounce-back scheme in Northern Ireland, which is predominantly an SME economy? Will there be regular updates on the number of successful applications, along with their value? Is he aware of concerns among some big players, including the Bank of Ireland, that they have yet to be accredited for the bounce-back scheme? Finally, has any assessment been made of support available in the Republic of Ireland and how it compares with what is on offer to business in Northern Ireland?

I know that my noble friend takes a close interest in matters in Northern Ireland. These schemes are available to businesses across all regions of the UK, and many lenders acting in Northern Ireland have received accreditation. However, we are working to get more lenders fully accredited as quickly as possible. Fourteen lenders have now been accredited for the bounce-back loan scheme and we are seeking to get more approved as quickly as possible.

Smaller companies will rely on the future fund for support, yet the Government have said that companies are required to have already raised £250,000 to be eligible. This will put both diverse funders and locations outside of the south-east at an enormous disadvantage. How will the Minister ensure that the future fund will neither deepen existing inequalities nor perpetrate new ones, particularly when, as I understand it, all 13 advisers to the fund are men?

We have introduced a comprehensive package of measures designed to support any business facing difficulties in this period, including the various loan schemes and grants and support for the self-employed. Start-ups may be able to access CBILS or the bounce-back loan scheme if they fulfil the eligibility criteria. We keep them constantly under review to ensure that as many businesses as possible receive the support that they need.

My Lords, unlike the pubs that they supply, most of our small breweries are not eligible for grants or business rate relief. As a consequence, over half of them have not been able to access any financial help from the Government. Two-thirds have stopped brewing completely and there have been many redundancies. Will the Minister agree to meet urgently with officers from the small independent brewers association to see whether a satisfactory solution can be found to this problem?

Small breweries are a subject close to many of our hearts. We are responding rapidly to feedback to ensure that all eligible businesses, including breweries, can feel the full benefit of support that is available through the package. I would be very happy to join the noble Lord in meeting representatives if that is required.

I do not expect the Minister to agree with me but it seems to the business community that the business interruption loan scheme has largely failed SMEs because the banks were not prepared to take the risk. Now, the Government are taking the risk with taxpayers’ money through the bounce-back scheme but small businesses applying for a bounce-back loan are still expected to take the full risk, which many are hesitant to do. What difference to take-up do the Government estimate that the introduction of the bounce-back scheme will make?

As I said in an earlier answer, a huge number of loans have been approved—160,000 in the first three days of the scheme—so I am afraid that many small businesses do not agree with the noble Baroness.

CBILS is much criticised for being slow due to the many checks. This approach is much more suitable for equity investment. Will the Government create such a vehicle instead, to help create new ways of working and particularly to help those firms already overloaded with debt?

As I said in earlier answers, there are a number of different support packages besides CBILS, including the furlough and direct grant schemes. A number of supports are in place for all businesses. I do not accept that the systems have been slow to operate. As I said, 160,000 loans were approved under the bounce-back scheme in the first few days of operation.

I draw the attention of the House to my interests as listed on the register. I congratulate the Government on their package of measures to support both businesses and individuals during this difficult period but, as my noble friend the Minister will appreciate, time is of the essence for businesses. Does he therefore have an average figure for the time between applications for business investment and bounce-back loans and the arrival of funds into company accounts? Secondly, on the furlough scheme, I understand there will be an announcement later today by the Chancellor. Has any consideration been given to the minimum furlough period for employees and whether it would be appropriate for a more flexible approach to be taken for those companies—many businesses—which are working week-on, week-off to cope with ad hoc business conditions?

I can tell my noble friend that many bounce-back loans are being approved within a day. We are getting the money out to companies as quickly as possible. I am sure she will understand that I do not want to give out information in advance of what the Chancellor might say in Parliament this afternoon.

My Lords, ethnic minority business owners have historically found it more difficult to access bank loans and other finance. In many cases, they operate microbusinesses where they would have to be almost a prophet to accurately forecast their profit. Have the difficulties faced by ethnic-minority business owners been factored in?

The noble Lord raises a good point but CBILS is open to businesses across all sectors in all parts of the country. We continue to monitor and review the implementation of all our loan schemes and we will not be slow to make any necessary changes. If the noble Lord has any specific information about difficulties being experienced by ethnic-minority businesses, I would be very happy to see it.