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Clarity sought over recovery of COVID-19 business loans

Taxpayers may be forced to “pick up the tab” for billions of pounds of support for businesses as the UK finally emerges from the COVID-19 pandemic, according to two leading professional advisers.

The UK Government has issued billions of pounds worth of loans since the onset of Coronavirus, through various financial support programmes including the Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS).

BBLS, which provides loans to businesses of up to £50,000 interest-free for the first 12 months and is by far the biggest loan scheme established during the pandemic, has been dogged by allegations that a minority of borrowers fraudulently obtained some of this financial support.

Now Peter Brewer, partner in the commercial litigation team at law firm Clarke Willmott LLP, says there is “an urgent need for clarity” on behalf of the Government and banks around how any fraudulent loans will be recovered.

“This time last year the banks were working seven days a week to support their clients, under considerable Government pressure to do something to help, in many cases lending against propositions that they would not normally lend against,” said Mr Brewer.

“The Treasury’s intentions with BBLS and CBILS – to provide easy and quick liquidity for businesses – were honourable. However due to the speed at which the schemes were launched and at which the loans were advanced, there was limited due diligence, in particular with bounce back loans, with the result that they were susceptible to fraud.

“There are huge amounts of money involved and the banks already consider that some of this money will not be recoverable.

“Where the banks are unable to recover the BBLS lending, the Government and ultimately the taxpayer has guaranteed that it will repay the banks. But the crucial question is: who is picking up the tab for pursuing the recovery of loans that were taken out fraudulently?”

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