£1.1bn of COVID small business loans identified as fraud, claims government source

·2-min read

A total of £1.1bn of government loans given to small businesses during the pandemic have been classified as fraud so far, according to Reuters.

The figure is due to be published as part of new data from the Department for Business, Energy and Industrial Strategy (BEIS), a government source told the news agency, giving a firmer indication of how widespread the issue could be.

Around £47bn of COVID bounce back loans were handed out to smaller firms to support them during UK lockdowns.

Earlier this year, the National Audit Office estimated as much as £5bn of this could have been fraudulently claimed.

And while the £1.1bn figure is lower, it only accounts for fraud identified so far, meaning more could surface as further investigations take place.

Sky News understands the data is due to be published on Monday.

As the then Chancellor, Rishi Sunak announced the bounce back loan scheme in May 2020 as businesses across the country were forced to shut up shop because of COVID.

Approximately 1.6 million companies were given the payments of up to £50,000 each from British banks.

But the usual credit checks were thrown out to get the money to companies as quickly as possible, and the government promised to front up 100% for any cash linked to defaults on repayments or fraudulent applications.

In January 2022, the Treasury said it expected to write off £4.3bn of COVID payments that ended up in the hands of fraudsters.

The announcement led to the dramatic resignation of one of its ministers, Lord Agnew, who told the House of Lords the Treasury "appears to have no knowledge or little interest in the consequences of fraud to our economy or our society", adding that a mix of "arrogance, indolence and ignorance freezes the government machine".

Mr Sunak later denied "ignoring" the problem and pledged the government would "do everything we can" to recover the stolen loans.

Data from the source seen by Reuters showed banks had also claimed £2.6bn from the government to cover loan defaults, up from £1.6bn in March.

The figures also showed £28.3bn of loans are being repaid on schedule, while a further £4.7bn have been fully repaid.