Construction companies have taken out more emergency loans than any other industry, the British Business Bank has revealed.
Construction companies took just over 218,000 loans under the Coronavirus Business Interruption Loan (CBILS) and Bounce Loan programs. The second highest level of borrowing was observed in the auto trade, which took out 207,000 loans.
Construction was the second largest borrower by value, with £ 7.93 billion in loans made through October 4. The only sector to take on more debt was the auto industry, which accepted loans worth £ 9.56 billion.
CBILS and the Bounce bank loan program were introduced by the Treasury to enable businesses that, while viable, had been affected by the pandemic and needed new capital.
The CBILS launched at the end of March is aimed at SMEs. It allows borrowing of up to £ 5million from major lenders and alternative lenders, with the government guaranteeing 80% of the loan. The Bounce Back loan scheme was launched at the end of April and was aimed at smaller businesses, which could borrow up to £ 50,000, with the government guaranteeing 100% of the value of the loan. Both types are irrelevant for the first 12 months.
The bank’s data only covers loans made and does not reveal how many loans were actually drawn and used. It has not released data, including the value of loans, for the Coronavirus Large Business Interruption Scheme, which has been made available to large companies.
Experts believe that some companies have taken out loans so that they are available in an emergency. Chris Davies, Director of DRS Bond Management, said: “Some will never use it. The majority of the companies that we have seen using them are putting them to good use. He gave the example of companies making sure the supply chain gets paid and in some cases speeding up payments even though payments have slowed from the top.
But Davies also warned that some companies had only bought extra time before deep-rooted issues caught on: “There are an awful lot of zombie companies that have been given blood transfusions. [from the loans]He said. In the coming months.
In a recent report, the National Audit Office warned that up to £ 26 billion in loans through the Bounce Back loan program, which can go up to £ 50,000 each, may never be repaid.
MHA MacIntyre Hudson’s partner Brendan Sharkey said the ability of construction companies to repay loans depended on short-term demand trends: “The next six months is a tough time,” he said. he declared. “The construction industry is counting on getting the next job. If the work dries up, then the music stops.
He added: “Most people borrow in good faith [that they’ll repay it]. But if the job is not there, what can they do? They will go away.