UK businesses can apply for government-guaranteed loans to support cash flows during the Covid-19 (Covid) pandemic. While many businesses are eligible for these loans, small businesses in adversely affected sectors have borrowed the most.

Since March, UK businesses have raised over £80 billion of net additional finance from banks and via financial markets. The vast majority of this has been via three government-guaranteed loan schemes — the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS).

While these loans cater for businesses of varying sizes, smaller businesses have borrowed the most (Chart A). Figures from HM TreasuryOpens in a new window show that, of the £70 billion of loans approved by December 2020, around £45 billion were under the BBLS, which is aimed at smaller businesses. Almost all of the approved loans have been drawn down, resulting in an increase in borrowing of a similar amount.

Chart A: Most of the borrowing under government-guaranteed loan schemes has been by smaller businesses

Percentage of total borrowing under government-guaranteed loan schemes grouped by borrower turnover.

Footnotes

  • Sources: Submissions from lenders and Bank calculations as of end-August.

Our analysis of loan-level data collected in August shows that around 40% of borrowers under the BBLS have turnover of less than £100,000 per year, and around 5% have less than £25,000. Businesses availing of the other government-guaranteed loan schemes also tend to be smaller. Under the CBILS, businesses can have a turnover up to £45 million. But our analysis suggests that around 80% of CBILS borrowers have a turnover of £5 million or less.

According to our analysis of data from 15 lenders, businesses that had borrowed before Covid are more likely to have borrowed under the government-guaranteed loan schemes (Chart B).

Chart B: Businesses in the sectors most affected by Covid are more likely to have borrowed, especially if they had already borrowed before the pandemic

Percentage of businesses that borrowed under government-guaranteed loan schemes, split by sector.

Footnotes

  • Note: Many small and medium-sized businesses do not report their debt status to Companies House. As such, the pink line only captures a subset of businesses that had debt before Covid, and the purple line may capture some businesses that had borrowed before Covid.
  • Sources: Submissions from lenders and Bank calculations as of end-August.

Businesses in the sectors most affected by Covid, such as accommodation and food, are significantly more likely to have borrowed than businesses with similar characteristics in less affected sectors. This suggests that the lending schemes have supported the businesses most affected by Covid.

British Business Bank dataOpens in a new window shows that the schemes have been accessed across the UK. Our analysis shows that businesses headquartered in the North East, Yorkshire and The Humber, and the West Midlands are significantly more likely to have borrowed than businesses in the South East, even when controlling for other factors such as sector, age, liquidity, leverage and firm size.

The Financial Policy Committee will continue to monitor lending under the schemes in collaboration with HM Treasury, the British Business Bank, and the Department for Business, Energy and Industrial Strategy.

 

This post was prepared with the help of Will Banks and Danny Walker.

This analysis was presented to the Monetary Policy and Financial Policy Committees as part of their December 2020 rounds. Some of this analysis was featured in the December 2020 Financial Stability Report.

Share your thoughts with us at BankOverground@bankofengland.co.uk

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