The government has sought to allay growing fears about the impact of a protracted Covid-19 lockdown on the economy by announcing that its loan guarantee scheme will be open to mid-sized firms that were in danger of being left out.
On the day that the foreign secretary, Dominic Raab, confirmed that the quarantining period would last for at least a further three weeks, the Treasury said it was taking steps to help businesses with annual turnovers of more than £45m – which are stuck in what has become known as the “squeezed middle”.
The chancellor, Rishi Sunak, said that all viable businesses with turnover of £45m-£250m would be able to apply for government-backed loans of up to £25m. Firms with turnover of more than £250m will be allowed borrow up to £50m from lenders.
There is a separate scheme for even bigger companies. Those with an annual turnover of more than £500m were excluded when the chancellor first announced his plan to offer lenders a government guarantee of 80% on each loan in order to give them confidence to lend.
Banks offering the loans are expected to work through the weekend so that the scheme is ready for Monday.
Business groups have lobbied hard for all firms – no matter what their size – to be included in the CBILS (Coronavirus Business Interruption Loans Scheme, for firms whose cashflows have been hit by Covid-19), and the chancellor said he had listened to their concerns.
Sunak said: “I want to ensure that no viable business slips through our safety net of support as we help protect jobs and the economy. That is why we are expanding this generous scheme for larger firms.
“This is a national effort and well continue to work with the financial services sector to ensure that our £330bn of government support, through loans and guarantees, reaches as many businesses in need as possible.”
The chancellor has been under pressure to act as evidence has mounted of the likely hit to the economy of the shutdown caused by the pandemic and the slow rate at which loan applications are being processed by banks.
Earlier this week, the governments independent forecasting body – the Office for Budget Responsibility – predicted that the economy would shrink by 35% in the second quarter of 2020 and by 13% in the year as a whole. The Treasury is concerned that viable businesses will go to the wall without state support.
Stephen Jones, chief executive of UK Finance, a trade association for the banking and financial services sector, said: “Banks and finance providers are committed to helping British businesses through these difficult times.
“With over £1.1bn already lent to small and medium-sized firms through the CBIL scheme, the launch of the new scheme for larger businesses will help to expand this support during these challenging economic conditions.”