Larger firms thrown new loan lifeline

Business groups have applauded the UK government's decision to quadruple the size of emergency loans available to larger businesses affected by coronavirus outbreak.

The UK avoids a recession with Q3 rise in growth
The Treasury in London announced on Tuesday that the maximum available under the Coronavirus Large Business Interruption Loan Scheme (CLBILS) would be increased on May 26 from £50 million to £200 million.

Companies asked not to pay dividends and exercise restraint on senior pay

One condition imposed by the Treasury will mean that "companies receiving help through CLBILS and the Bank of England’s Coronavirus Corporate Financing Fund will be asked to agree to not pay dividends and to exercise restraint on senior pay".The Bank of England, which will implement the restrictions on the scheme, said the ban on dividends and restrictions on executives' pay were "intended to create incentives for, and promote the ability of, businesses to repay their borrowings".The CLBILS scheme was introduced in April by Chancellor of the Exchequer Rishi Sunak to support companies with sales of between £45 million and £250 million. The scheme has so far funded companies to the tune of £359 million.Economic Secretary to the Treasury John Glen said, "We're determined to support businesses of all sizes throughout this crisis and our loans and guarantees have already provided over £32 billion to thousands of firms."Today we're increasing the maximum loan to £200 million to make sure companies get the help they need."

Confederation of British Industry: Treasury listening to the concerns of business

Rain Newton-Smith, chief economist at the Confederation of British Industry (CBI), said that some larger companies "urgently" needed access to larger loans to tide them over at a critical time for the economy.She added, “Many of them are important regional employers, so the Treasury’s extension of maximum loans to £200 million shows just how much they are listening to the concerns of business right now.“Bounce-back loans are the standout success so far among government packages supporting firms’ cashflow amid the crisis. Meanwhile, lenders are continuing to act at speed to get emergency funds to those businesses most in need."British Chambers of Commerce: "These important changes could make a real difference to larger firms"Suren Thiru, head of economics at the British Chambers of Commerce (BCC) said, “It is good to see the government continue to listen to business concerns and make improvements to existing schemes.“These important changes could make a real difference to larger firms in particular and alongside the other lending support schemes will help ensure that more businesses of all sizes get access to the finance they need to help weather this unprecedented economic storm.”

Transparency: Weekly list of companies accessing the Coronavirus Corporate Financing Fund

The Treasury and the Bank of England also announced that, from June 4, they will publish a weekly list of the companies accessing the Coronavirus Corporate Financing Fund and how much they have borrowed."This change will make the scheme more transparent and enable participating businesses to demonstrate their access to the scheme," said the Treasury. Loans under this the scheme are classified as going to businesses that "make a material contribution to the UK economy".

Read more news and views from David Sapsted.

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