Sunak to unveil new Covid-recovery loans for UK businesses

The new loans are likely to be 80% government-backed, with interest rates capped at about 15%.

Chancellor of the Exchequer Rishi Sunak is poised to unveil a state-backed loan program to help companies in the UK recover from the economic devastation wrought by the coronavirus pandemic, a person familiar with the plan said.

Britain's Chancellor of the Exchequer Rishi Sunak speaks at the House of Commons in London, Britain January 11, 2021. UK Parliament/Jessica Taylor/Handout via REUTERS THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT(via REUTERS)

The new loans are likely to be 80% government-backed, with interest rates capped at about 15%, according to the person, who asked not to be named discussing measures set to be announced in next week’s budget. The terms are similar to those in existing state-backed lending programs.

The plan will replace Coronavirus Business Interruption Loans, its counterpart for large companies, CLBILS, and the fully state-backed Bounce Back Loans, which have lent a combined 73 billion pounds ($102 billion) to struggling companies. Sunak delivers the U.K. budget on March 3.

The Treasury said in December that it was working on a successor to the current loans programs. It was keen to replace the Bounce Back Loans in particular, amid warnings that they’re susceptible to fraud. The House of Commons Public Accounts Committee said in December that taxpayers could be on the hook for about 26 billion pounds of loans that may never be repaid because of fraud or because companies can’t afford to do so.