It is a pleasure to serve under your chairmanship, Mr Mundell, and I congratulate my hon. Friend the Member for Midlothian (Owen Thompson) on securing this important debate.
I raise the issue of the covid recovery loan scheme, described on the Government’s own website as supporting “access to finance for UK businesses as they grow and recover from the disruption of the covid-19 pandemic”. It also describes how businesses can receive up to £10 million and is clear the Government are guaranteeing 80% of the finance to the lender. Not all lenders appear to be engaged in this scheme, and those who are have varying degrees of enthusiasm—but I set that aside for the moment.
The rules say that eligible businesses must be trading in the UK, would be viable were it not for the pandemic, have been adversely affected by covid, but are not in collective insolvency proceedings—and there is the rub. There was, quite rightly, a large degree of forbearance during the crisis from the public and private sectors but
many creditors are now calling in debts that result from covid before debtor companies have returned to pre-crisis cashflow and profitability levels.
I know of many otherwise viable businesses, who in normal times could perfectly well service their debts, now finding themselves financially distressed as a result. They may fall foul of the recovery loan scheme criteria or lenders’ risk management practices if they are subject to a Scottish decree or an English county court judgment. In short, they are being punished for being adversely affected by covid—one of the criteria to get the money in the first place—and are unable to apply for funds because of how that impact is being felt. Decisions by the lenders and banks are more irrational precisely because the Government are guaranteeing 80% of the loan.
I hope the Government will put pressure on the lenders to take part in the scheme and persuade them to analyse the underlying viability of a business, rather than issuing a hard no simply because of a CCJ or a decree. It would be irrational if a business meets the criteria of being adversely affected by covid, but is denied access to the help it needs at precisely the time it needs it the most because the financial distress caused has resulted in a court order.
I will briefly raise another problem. I have been told by a business finance brokerage that of the 60 businesses he has supported to make full applications for the recovery loan scheme, only a single, solitary one has received the money, and that is deeply troubling.
5.8 pm