The government will lose less money from three Covid loan programs due to companies failing or committing fraud than initially feared, new figures suggest.
An estimate by the Department of Business, Energy and Industrial Strategy (BEIS) found that around £ 19.8 million of the £ 66.5 billion that was loaned under three programs could be lost.
The data only extends through March of this year, and more than an additional £ 10bn was on loan before the close, so the final figure lost is likely to be a bit higher.
That’s a large sum of money, but a far cry from a previous estimate which placed losses between 35% and 60% – or around £ 23-40 billion on loans that were made in March.
To speed up program payments, lenders only had to do the most basic checks before distributing money to businesses. In the end, over a million businesses took out a rebound loan.
The bulk checks have left many worried that fraudsters could target the scheme in large numbers.
The government estimates that between £ 3.6bn and £ 6.3bn in loans could be lost due to fraud and error.
“Most of these expected losses result from borrowers defaulting on legitimate reasons, but the department has also factored in anticipated losses due to fraud in the BBLS,” the department said.
“He considers that due to the design of the program and the speed with which loans were issued through this program, the risk of fraud is considerably higher than in the other two loan programs.”
He worked with the insolvency department, the house of companies, other departments, banks and local authorities to track down the crooks.
This work is expected to continue for several years. Authorities have already made more than 65 arrests and recovered £ 3.5million as a result.
About 4% of the rebound loans were repaid in full, while 2% were in default, according to the British Business Bank, which administered the program.
More than a fifth of businesses have chosen an option that allows them to repay their loans at a slower pace.
Only about half a percent of the loans from two other programs, called CBILS and CLBILS, are in default.
The British Business Bank said: ‘Although it is too early to give a definitive view of the final level of defaults, this latest data suggests that current levels of non-repayment are lower than some illustrative worst-case scenarios presented. before the start of refunds. .
“These levels are, however, subject to any change in market conditions or individual circumstances, and are therefore expected to fluctuate in the future.”