Over 18,000 Covid support loans may be fraudulent

Defaults already at £2bn under scheme set up by Sunak to help businesses survive in lockdowns

MORE than 18,000 of Rishi Sunak’s bounceback loans are suspected frauds, new Government figures reveal, with taxpayers already facing a bill of £2bn for loans that have gone bad.

In its first disclosure of repayment data, the British Business Bank (BBB) said at least 18,000 pandemic-era bounceback loans have been identified as suspected frauds by banks. Lenders review cases on a continual basis, which means the true number is likely higher.

A tenth of all loans made through the scheme – almost 175,000 – are already either in arrears or default at an estimated cost of £5.11bn to the taxpayer. Bounceback loans worth £1.9bn have already defaulted. It is unclear how much of this is linked to fraud.

Launched in April 2020, the Bounce Back Loan Scheme was then chancellor Mr Sunak’s solution for safeguarding small businesses in the first months of the pandemic as lockdowns threatened to push thousands into bankruptcy.

Under the scheme, applicants were allowed to borrow up to £50,000 with relatively light checks to speed the pace of lending. Borrowers were told to selfcertify their application data and banks were given a government guarantee on any losses to encourage lending.

By the time the scheme closed in March 2021, the government had lent £46.7bn. Mr Sunak hailed bounceback loans as a success, arguing that they had saved thousands of companies from collapse, but critics said the loose lending standards made them ripe for fraud.

The Government was warned by the British Business Bank as it was setting up the scheme that it was “vulnerable to abuse by individuals and by participants in organised crime”.

Conservative peer Lord Agnew resigned his position at the Treasury in January over the Government’s handling of Covid support loans, saying there was “little interest in the consequences of fraud to our society”. The National Audit Office said the Treasury had prioritised speed of lending “over almost all other aspects of value for money” and said: “Counter-fraud activity was implemented too slowly.”

The Government’s own estimates suggested taxpayers would ultimately be on the hook for £4.9bn in losses.

Bounceback loans were one of several forms of support offered to companies by the Government during the pandemic. The British Business Bank said just 2pc of loans through the Coronavirus Business Interruption Loan Scheme, which carried more stringent checks, were in default or arrears. The figure for bounceback loans is 11pc.

Cases related to alleged bounceback loan fraud or misuse have begun to show up in court. In May, Tarek Namouz, a 42-year-old former pub landlord from London, appeared in court accused of sending thousands of pounds in bounceback loans to fund Islamic State in Syria. A two-week trial is due to begin in November.

‘All of this excludes the estimated £4.9bn price of fraud in the bounceback scheme’

The Government has begun handing taxpayer cash to banks for Covid loans that have defaulted.

Yesterday’s figures show small lenders Tide and Capital on Tap have claimed government guarantees on almost a quarter each of their Covid loans. Metro Bank claimed 8.5pc of the value of its loans from the Government.

Mark Mullen, the former head of First Direct and now chief executive at Atom bank, said: “Today’s numbers suggest another £4bn of calls on the taxpayer are to come, and all of this excludes the estimated £4.9bn price of fraud in the bounceback scheme that caused a Treasury minister to resign.”

A spokesman for UK Finance defended bounceback loans, saying that 1.6m small businesses received loans through the scheme, many of which would not be around today had it not been for the support.