Sunak mulls new lifelines for Covid-struck firms

Linda J. Dodson

The Treasury is considering ways of making it easier for businesses to access coronavirus support loans – ahead of expected measures from the Chancellor designed to create “jobs, jobs, jobs” in an effort to kick-start the economy. 

Officials from the Treasury and the British Business Bank are reviewing access to state-backed loan schemes after the European Commission last week relaxed state aid rules that blocked lifelines for some UK firms. 

A Treasury spokesman confirmed they “are considering the implications of this [EC’s] amendment for the loan schemes” and that the change by the EC was “an important step in ensuring all viable businesses receive the help they need”. 
Treasury sources said it was likely that UK firms rejected for emergency help under the EU’s financial difficulty tests could reapply if the loan schemes were altered. 

The UK was forced to adopt so-called “financial difficulty” tests under EU state aid rules, which blocked access to the loans by otherwise solid businesses, such as start-ups, that were loss-making because they have invested heavily for growth, or have complex structures. 

The Commission last week published the amendment to the so-called “temporary framework” for all small and micro companies, opening the door to changes to the UK’s loan guarantee schemes.

The previous rules “seemed to disproportionately affect relief schemes in the UK”, according to Allie Renison, head of Europe and trade policy at the Institute of Directors, which had sent the Commission numerous examples of British firms denied aid.

She added: “The undertakings in difficulty tests has been a sticking point for a number of firms, blocking them from much-needed finance. We look forward to further guidance enabling companies to access the support they need.”

Chris Wilford, head of financial services policy at the Confederation of British Industry, said these “eligibility hurdles have been a real stumbling block for many firms across the UK throughout the crisis”.

He added: “They have had a real impact on the ability of some high growth firms and larger firms with more complex structures being able to access the schemes.”

However, he warned that it was still unclear how the changes would help those mid-tier firms who may still fall foul of these rules, adding: “Many of these are important regional employers and critical to our recovery.”

More than 1m firms have been lent £30bn under the Bounce Back Loan Scheme, which provided loans of up to £50,000 that are 100pc backed by the taxpayer. It was introduced after firms struggled to access help under a similar scheme that offered a 80pc guarantee.

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