The chancellor has said he will keep “under review” the government’s much-criticised emergency loan scheme as MPs and businesses call for extensions to state-backed guarantees.
On Tuesday evening, Rishi Sunak said that he would look at other countries to see if the government “could learn and improve” on the bailout scheme for small businesses, which provides loans of up to £5m on an interest-free basis and 80 per cent guaranteed by the government.
The government has faced calls to consider adopting similar schemes to those in Switzerland and Germany, where state guarantees of 100 per cent of loans have sped up help to businesses.
George Osborne, the former Conservative chancellor and editor of the Evening Standard newspaper in London, told the BBC on Tuesday that the government should follow suit for the smallest businesses.
Ed Miliband, Labour’s shadow business secretary, also called for 100 per cent guarantees for smaller companies, saying the risk was that the government would not go far enough to help.
Mr Sunak said there was an argument for looking at this, but he added that this approach might stop banks from doing credit checks, saying that there was an “economic and fiscal question” about whether it was the “right intervention” for the UK. He said that the UK did not necessarily have the “historic systems” that allowed other countries to deliver these schemes.
Companies have criticised the scheme since it launched a few weeks ago, saying that banks have been slow to respond to inquiries given its complexity, or have demanded stringent requirements that have stopped them being able to take advantage of the loans.
But the government is expected to report a sharp increase in take-up on Wednesday since efforts were made to simplify and speed up the process this month, with total loans expected to have exceeded £1bn.
Mr Sunak said that he hoped to see a further acceleration of the loan scheme in coming days, with approvals rising four times at the end of last week, and the amount of money lent rising five times.
“The changes . . . have made a difference,” he said.
Mr Sunak said that the UK had used other support mechanisms, pointing to £3bn-£4bn distributed in grants through local authorities — about four times higher than the previous figures.
He added that the internet portal for companies to apply for state funds to cover the wages of temporarily laid-off workers was expected to be launched on Monday.
The chancellor said the cash may still not be handed to companies until closer to the end of April, given a delay of “several days” to check for fraud and to process payments. He said that the system was being testing with a small group of companies.
But companies warn that this may be too late to cover wages for the month, with many workers set to be paid on April 25, causing a potential cash crunch for companies such as restaurants and bars and in sectors such as retailing.
They were the first to be hit by coronavirus-enforced closures and are already running out of money. Many pay weekly wages, which has left them with a steadily depleting cash pile that some warn could run dry before the end of the month.
Two-thirds of companies have already furloughed staff ahead of the launch of the coronavirus job retention scheme next week, according to a poll of companies by the British Chambers of Commerce, stoking concerns that many will struggle to pay wages before the scheme is able to cover their costs.
The figures, taken from a poll of about 700 companies, are higher than official estimates. On Tuesday, the Office for Budget Responsibility produced an economic model for a scenario in which 30 per cent of all employees were furloughed under the government scheme, at a cost of £42bn.
One government official said the OBR figure was a “reasonable” estimate. Earlier estimates by Treasury insiders suggested that about 3m people, or 10 per cent, would be laid off temporarily at a cost of a little over £10bn.
The Treasury says that this estimate was never official, but allies of Mr Sunak argue that if the OBR scenario is accurate it would prove how effective it had been at staving off mass unemployment.
But executives and lobby groups are worried about implementation of the scheme given the slow rollout of government-backed loans, which have been mired in problems that prevented companies from being able to access funds.
Dr Adam Marshall, BCC director-general, said that a high number of companies had furloughed staff in anticipation of the scheme coming online, but “it is still unclear whether they will start receiving funds before their payroll date, which could exacerbate the cash crisis many businesses are facing”.
The furlough scheme is due to end on June 1, which is causing some larger companies to consider redundancy proceedings this week, given the need for a 45-day collective consultation period and expectations that staff will still not be able to return to work by then.
The BCC poll also showed continued frustration with the government’s bailout loan for small businesses, with just 2 per cent reporting they had accessed the scheme so far and about 9 per cent saying that they had been unsuccessful.