UK Government Response to COVID-19

By way of an update to our recent article on the Coronavirus Large Business Interruption Loan Scheme (“CLBILS”), it has recently been reported that the approval rates of the scheme (which aims to support the largest businesses) are the lowest of all the COVID funding schemes introduced by the government, with only 17.3% of applicants being approved. In response, the government has announced, on 19 May 2020, changes to the CLBILS, including that larger businesses will benefit from loans up to the lower of 25% of turnover, or £200m (up from a maximum of £25m for businesses with turnover from £45m up to £250m and a maximum of £50m for businesses with a turnover of over £250m). The changes are expected to go live on 26 May 2020 and full details will be available on that date through the British Business Bank website. 

Further, it is expected that businesses shall be banned from paying dividends to investors or cash bonuses and pay rises to senior management unless previously agreed as part of the overhaul of the scheme. These restrictions are also expected to apply to the CCFF if participants wish to borrow money beyond 12 months. 

On Tuesday (19 May 2020) the Treasury announced that under the “bounce-back” loan scheme (whereby loans of up to £50,000, depending on the applicants’ annual turnover, are aimed to be provided within 24 hours), 464,393 loans had been agreed with banks, worth £14.2bn. A further 40,564 loans worth more than £7.2bn have been provided by banks through the CBILS (aimed at companies with an annual turnover of up to £45m). It was reported that £18.8bn worth of commercial paper had been purchased by the BoE from 55 companies under the COVID Corporate Financing Facility (“CCFF”). Meanwhile, only 86 companies have secured loans worth £590m from banks through the CLBILS.

It is considered that the low up-take of the CLBILS is due to the stringent qualifying criteria which the government may be addressing in the proposals to be released on Tuesday 26 May.

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