The UK chancellor of the exchequer (finance minister) yesterday started filling one of the glaring gaps in the UK’s program of support for business during the pandemic. But why does he not go as far as in France or the US?
The announcement is here in this morning’s press release. It creates a new scheme addressing a gap in UK support, many firms do not qualify for either the CBILS scheme for loans to firms with annual revenue of less than £45mn or the Bank of England run Covid-19 Corporate Financing Facility. “The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will ensure that more firms are able to benefit from government-backed support during this difficult time. It will provide a government guarantee of 80% to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million.“
This is welcome, but two big questions remain. The first: there are still many medium to large firms who do not qualify for this scheme or the Bank of England facility. Why not go as far as in France where the equivalent government backed corporate loan scheme is available to firms of any size, capped only by revenue?
The second question, a fundamental shortcoming: even guaranteed loans still have to be repaid, so businesses will still fail. To prevent failures why not follow the US example and allow loans to smaller firms to convert to grants, provided these firms keep employees on their payroll, as described in a Financial Times article today by Gillian Tett?