‘Something has gone wrong, I am worried’: Ex-Bank of England governor Lord Mervyn King gives stark warning as just 4,200 UK firms get crisis loans compared to 725,000 in America
- Lord King is ‘worried’ about the Government’s emergency bailout loans system
- It has seen just 4,200 firms in Britain get the payment out of 300,000 applicants
- £800m has been handed out in UK – compared to £146bn to 725,000 firms in US
- Lord King has said the survival of businesses is key to a rapid economic recovery
Former Bank of England governor Lord Mervyn King has warned ‘something has gone wrong’ with the Government’s emergency bailout loans system.
The 72-year-old admitted he is ‘worried’ about the workings of the scheme which has seen just 4,200 firms in Britain get the payment out of 300,000 applicants.
The worrying figures have emerged despite the system already being overhauled earlier this month after firms complained they could not access the cash.
Former Bank of England governor Lord Mervyn King told Sky News yesterday that ‘something has gone wrong’ with the Government’s emergency bailout loans system
Around £800million has been handed out in total – a figure which pales in comparison to the £146billion handed to 725,000 companies in the US.
Lord King, who was governor of the Bank of England during the financial crisis in 2008, said the survival of businesses was key to a rapid economic recovery.
Racing car maker owner says dealing with high street banks has been ‘catastrophic’
Tim Colman, owner of racing car maker Chevron Cars, is among those fearing for the future of his company which is struggling to get a loan.
He has written to the British Business Bank, which is administrating the loans, after failing in his attempts to get any of the money available so far.
Mr Colman, whose business is based in Basingstoke, Hampshire, said his experience of dealing with the high street banks during the process has been ‘nothing short of catastrophic’.
He told the Sunday Telegraph: ‘If the lack of funding continues for long I will simply be unable to trade and my 55-year-old business will have to shut its doors.’
Chevron was founded by Derek Bennett in 1965 who designed and built the cars until his death in 1978.
He told Sky News: ‘The economy will recover quickly only if we can keep the businesses that existed at the beginning of it still functioning and still able to pick up the reins when the epidemic is over.
‘If we find so few business loans being granted, something has gone wrong.’
He added that local bank branches should not have been closed because they could have helped answer questions of businessess trying to apply for the loans.
Business owners have warned the failure of the loans system means they will not be able to pay staff at the end of the month and will go bust.
Tim Colman, owner of racing car manufacturer Chevron Cars, said: ‘If the lack of funding continues for long I will simply be unable to trade and my 55-year-old business will have to shut its doors.’
Chancellor Rishi Sunak last month said he would do ‘whatever it takes’ to protect jobs as he promised £330billion in state-backed loans.
Banks have been overwhelmed by demand since the Coronavirus Business Interruption Loans Scheme was launched on March 23.
They have been accused of refusing loans due to firms failing to meet complex eligibility criteria.
Critics have questioned why the pool of lenders was just 40 and why more support was not given to banks to keep local bank branches open to tackle the workload.
Chancellor Rishi Sunak (picured at a Downing Street press conference on April 8) said he would do ‘whatever it takes’ to protect jobs as he promised £330billion in state-backed loans
The Government hopes that by protecting firms from going bust and laying off staff the UK will recover quickly from coronavirus with a V-shaped recession.
More than two-thirds of the loans, 2,500 in total, have been approved by state-owned bank RBS – which is understood to be the only business offering loans worth below £25,000 to small businesses.
In a sign of the panic in Whitehall, Richard Sharp, Mr Sunak’s former boss at Goldman Sachs, has been parachuted in to oversee the Government’s rescue package.
Business Secretary Alok Sharma said: ‘I have spent the last couple of days talking directly to some of the largest lenders who are part of this scheme.
‘I have been very clear to say to them that we need to get money out of the door as quickly as possible. We have set this up at pace and everyone is literally working around the clock.’
Last week experts predicted that the UK economy was declining at its fastest rate since the 1920s. More than 1.2million people have applied for Universal Credit in the UK since the start of the pandemic.
The lockdown, initially implemented for three weeks, is expected to be extended into May – putting more strain on companies who have closed and seen their income evaporate.
There are fears in Whitehall that as many as four million people could become unemployed.
Labour’s Lisa Nandy, the Shadow Foreign Secretary, said: ‘Those schemes currently aren’t working quickly enough, or comprehensively enough.
‘Those businesses and workers are dealing with the situation in real time, and every day counts.’