The £1 billion loan scheme to help small businesses cope with the coronavirus crisis may be too small, too complex and take too long to launch, banks say.
Plans announced last week by Rishi Sunak, the chancellor, to help banks to make short-term loans to businesses struggling with cashflow and other problems by underwriting 80 per cent of those loans with public money were praised. But that has turned to frustration among banks as the terms are yet to be set, which could mean it will be weeks before businesses receive the support.
There are also concerns that it is too small to have an impact and may be too bureaucratic if businesses are required to fill in extensive forms.
Stephen Jones, chief executive of UK Finance, said: “The impact of Covid-19 is already starting to be felt by small and medium-sized businesses around the country, so it’s essential that we get this scheme up and running within days and that it is simple to access.”
One banker said: “My concern is that with the current rate of progress of infection, opening the scheme in a few weeks may be too long.”
The scheme will be administered by the state-owned British Business Bank. The government will support loans of up to £1.2 million and the total it will guarantee this year will rise from £500 million to £1 billion.
The size of the scheme, revealed in the budget last week, disappointed some, who had hoped the Treasury would be more ambitious.
There are also concerns that if it is modelled too closely on the Enterprise Finance Guarantee it may be overly complex. Instead there should be simple criteria for establishing whether a business was solvent before the coronavirus outbreak and if so it should qualify, bankers said.
Oliver Prill, chief executive of Tide, a small business lender, said: “We are already starting to see a severe downturn in the turnover of small businesses in a number of sectors. This is set to accelerate and spread to other industries over the coming weeks and months and will lead to an existential crisis for a huge number of small businesses and self-employed people.”
The British Business Bank said that the scheme “will be in place in a matter of weeks rather than months”.
Meanwhile, City firms are stepping up their response to the Covid-19 crisis. Goldman Sachs, which has about 6,500 employees in the UK, is splitting teams today in a move that will involve hundreds of its staff working from its disaster recovery site in Croydon. It has confirmed two cases of Covid-19, with employees in London and Sydney having contracted the virus.
Most Goldman staff in the UK will alternate weekly between working from home and from its European headquarters in the City. However, some teams, in particular on the trading side of the business, will be permanently split between Goldman’s Croydon site and its City base.
Schroders, the fund management firm which has 5,000 staff in total, including 2,500 in London, is splitting its workforce from today between their homes and offices. They will also alternate and its offices will be deep-cleaned during the switchover.
Since last week some UK staff at the Wall Street bank Morgan Stanley have been working from its disaster recovery site near Heathrow airport. All 20,000 UK employees of Deloitte will work from home tomorrow to test their ability to operate remotely.