In the first set of figures detailing the performance of government-backed loans offered to struggling businesses during the outbreak, the Department for Business, Energy and Industrial Strategy said around 8% of the 1.6 million borrowers – around 130,000 – failed to repay their debts by March this year. Most of the claims – around £352m – were for recovery loans, the popular scheme which accounted for £47bn of the total £77bn granted to businesses through the scheme. Banks and online lenders, which distributed the loans on behalf of the government, then asked for a total of £421 million in cash from taxpayers to cover the defaults. About 18,000 of the 1.5 million recovery loans requested were flagged for suspected fraud by lenders, although no updated estimates of the potential cost to the government were given. It was previously estimated that fraud losses could exceed £4.9 billion, although more recent estimates from PwC, the accountancy firm hired by the government, put that figure down to £3.5 billion. “We are still early in the life of the programs and in the lending cycle, so it is too early to accurately estimate the levels of fraud and credit losses,” the business department said. Estimates of default and fraud, which are collected by the British Business Bank, are expected to change as more debt comes due, with many companies having taken advantage of a program that allows them to extend their loans for 10 years. The recovery loans, which were 100% backed by the state, were distributed by 28 banks and other lenders, with applicants able to borrow up to £50,000 each. Launched in May 2020, the plan was one of former chancellor and current Tory leadership candidate Rishi Sunak’s biggest interventions in the early months of the pandemic as he sought to protect the economy. However, critics claimed that not enough attention was paid to potential fraud, as customers were allowed to self-certify that they met certain criteria in an attempt to get more money out the door. Those concerns eventually led to the resignation of Anti-Fraud Secretary Theodore Agnew in January, who cited the government’s “dismal” efforts to control fraud and has since warned banks to be “very careful” before claiming the government guarantee. Lord Agnew later clashed with digital starling Bank after raising questions about fraud controls, claims the bank has denied. Starling asked Agnew to retract his statement. Subscribe to the Business Today daily email or follow Guardian Business on Twitter @BusinessDesk Metro Bank, Barclays and Starling Bank have claimed the most money so far in recovery loans, with the government paying £122m, £88m and £61m respectively. However, the percentage of claims in relation to their total loans varied, with Metro claiming around 8.5% of the total, while the amount claimed by Barclays and Starling totaled 0.8% and 3 .8%, respectively. All three lenders said they had committed significant resources to try to recover funds before calling on the government guarantee. Two lenders – Tide and Capital on Tap – claimed back about a quarter of the total money they each lent to businesses through the bounce program. Tide said it conducted all due diligence and was quicker to submit claims than some of its peers. She also said some of her clients were “younger” and therefore at a higher risk of failure. Tide added that the next 12 months will provide a “better picture” of defaults across all lenders. The government also cautioned against reading too much into the data on a per-lender basis, saying some “may be more advanced than others” in making claims, “which could lead to a distortion of the data”. Capital on Tap did not immediately respond to requests for comment.
