Business leaders divided over Covid loans crisis
By Laura Enfield | 3rd August 2022
Gloucestershire business leaders are divided over the £500million Covid loans crisis.
A report by the BBC has revealed more than 16,000 businesses which took out government-backed Covid loans have gone bust without paying them back.
Hundreds of directors got loans they were not entitled to and have now been disqualified from running businesses.
Figures from an FOI show the cost to the taxpayer of these insolvencies could be as much as £500million.
Locally, some experts have said the speedily handed out loans were a "lifeline" which saved businesses. But others have said the government should have been more cautious before handing so many out.
A total of 1.5 million bounce back loans worth £47billion were given to help businesses survive the pandemic. They were supposed to be paid back within 10 years.
Sir David Green QC told the BBC the checks the government required banks to do on applicants were "hopelessly inadequate".
Under the scheme any small company could apply for a loan of up to £50,000 depending on its turnover. Applicants were allowed to "self-certify" the figures.
Ian Mean, director of Business West Gloucestershire, said: "There is an unwritten rule in business—Don't borrow money that you can't pay back.
"That is where the government in its enthusiasm to cope with the fallout from Covid on companies made a very big mistake-not ensuring that legal measures were properly in place to avoid the huge debt now facing taxpayers.
"One big question facing the Treasury is: How many of these 16,000 companies that were given loans were going bust anyway?"
Lindsey Holland, owner of The Cleeve Hill Hotel and chair of TURF Cheltenham, said: "Many of our group didn't take advantage of the Covid loans due to concerns over repayment or whether there could be some 'catch' further down the line.
"It's incredibly disheartening so much money may be lost at a time when small independent businesses are being clobbered with staggering cost increases and no government initiatives in sight.
"Many within hospitality say that 2022 will see more small businesses lost than during the whole of Covid and yet the Government isn't taking any steps to try to support us. Maybe it's because they've realised they've got a massive hole to cover up."
However, Sam Holliday, FSB development manager for Gloucestershire, Bristol, Bath & South Glos, said the speed of the loans stopped many businesses from going bust.
He said: "It is obviously very concerning that some people who weren't entitled to support may have taken advantage of this and we are sure the authorities will chase them hard.
"However, we shouldn't let this mask the fact that without those loans and the speed in which they were delivered we would not have seen so many businesses get through their most challenging time since the Second World War.
"Clearly mistakes were made but it was a frantic, uncertain time and the banks were under enormous pressure to get the money out as soon as possible and for the most part they did so successfully."
Ruth Dooley, chair of GFirst LEP and partner of Hazlewoods, agreed that speed was of the essence when the loans were handed out.
"Businesses were already struggling and needed funds urgently to stay afloat.
"The economic intervention propped up both good businesses and weaker ones which survived longer than they would have done otherwise.
"Overall a huge number of businesses and jobs were saved by bounce back loans and I think history will judge the policy to have been a success in terms of supporting the economy when it was most needed."
Steve Gardner-Collins, chairman of Visit Gloucestershire, agreed the loads were a "lifeline" which allowed many visitor economy businesses to reopen during 2020.
But he said for many the money just prolonged the inevitable.
"There is a high turnover of hospitality businesses, with short lives, many who carried over losses from the previous season and took advantage of the easy application process.
"We see lots of closures each year in the sector - squeezing profits, writing off debts and low margins.
"Bounce back provided the majority with a much needed lifeline but it is not surprising to now see a high level of deception given the application process lacked governance".
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