Rishi Sunak is making plans to expand its Covid business loan program as Britain’s economic recovery may be hampered by labor shortages and mounting cost pressures.
The Treasury is considering an extension of the Recovery Loan Scheme (RLS) which is due to end on December 31 and could make the conditions less generous for companies.
Officials will consult with banks over the next month to decide whether or not to maintain the loan assistance and adjust conditions.
A source from Whitehall said the future of the program was under discussion as this month’s budget approached, but a decision by ministers could come later.
The RLS was unveiled during the Budget in March as a replacement for the Coronavirus Bounce and Interrupt Lending Programs for Businesses, offering an 80pc guarantee on debt between £ 25,000 and £ 10million. The state will bear most of the loan losses, which will encourage banks to lend to businesses.
The Chancellor will deliver a speech at the Conservative Party conference tomorrow as a slowdown in the recovery and pressure on construction costs add to the case for continued support for business.
Sources familiar with the talks said the program was designed to be flexible enough to change, noting ministers had not made a final decision on whether to continue support.
They added, “The program has always been designed to last beyond the end of the year. The question was what the program would look like after the end of the year.
Options for a revamped plan could include reducing the government guarantee, reducing the potential losses taxpayers face due to unpaid debt, and reducing the personal guarantee.
A Treasury spokesperson said: ‘We have provided over £ 79 billion to 1.6 million businesses through our government-backed Covid loans, including the payback loan program, to ensuring that businesses have the financing they need throughout the pandemic. “