Government Announces £330 Billion Loan Fund for Businesses to Fight Coronavirus

In the latest of the government’s measures to fight the ongoing novel coronavirus (COVID-19) crisis, the chancellor Rishi Sunak has just announced a series of financial packages designed to mitigate the impact on businesses — including restaurants, bars, and pubs —across the U.K.

Sunak said that the coronavirus is a public health emergency, and also an economic emergency. Pledging government intervention “on a scale unimaginable only a few weeks ago,” he announced a new £330 billion in guaranteed loans. The terms of those loans are not yet known, with Sunak merely stating that terms would be “attractive.” This financial package pledged today is significantly in excess of the £12 billion that Sunak announced in last week’s budget, but still represents loans, and loans need paying back, with interest.

“The government will stand behind business small and large,” saying the loans were designed “to get businesses through this.” And yet, many will be wondering whether burdening their businesses with further debt at a time when they have existing debt and immediate costs to cover, is what they need to survive in the long-term.

Responding to the widespread criticism and dismay from those in the leisure and hospitality sectors, particularly since the government’s social distancing measures yesterday were not enforceable and left many restaurants having to take the decision to close into their own hands, the chancellor said that the government’s action would be sufficient for hospitality businesses to claim against a policy which covered for pandemics. “For those venues which do have a policy that covers pandemics — the government action is sufficient to allow them to make claims,” he said.

For smaller businesses in those sectors (which in the restaurant industry includes many) which didn’t have insurance, non-repayable cash grants of £25,000 per business would be made available “to help bridge through this period.”

Furthermore, Sunak went further on the “business rates holiday” for those with rateable value of under £51,000, announced last week. Today, he said that all businesses would receive relief on business rates, irrespective of the rateable value. Business rates are a tax applied to commercial property, which is calculated according to an estimate of the rental value of that property on the open market.

He said the new funds available to businesses — categorised under the new “coronavirus business interruption loans” — will be accessible by the end of this week or the beginning of next week.

Notably, at this stage, the Chancellor did not announce any direct provision to support businesses which are facing the prospect of defaulting on rent payments; it also offered no protections for “gig economy” staff or those — as is typical in the hospitality industry — on zero-hour contracts. The government, which has not ruled out announcing further measures to “do whatever it takes”, is assuming that the non-repayable cash grants would be used to cover rent and staff costs in the short-term.

Stay tuned for industry reaction and what this means for businesses in the short-term as well as in the medium- and long-term.