The Treasury has called an urgent meeting with Britain’s biggest banks to review plans for emergency business loans before England’s second lockdown.
The Guardian understands big lenders – including HSBC, Barclays, NatWest and Lloyds – were contacted on short notice on Monday morning, hours before Boris Johnson was due to address parliament about fresh Covid restrictions.
“We need to convene an urgent meeting at noon to discuss the favoured bounce-back loans,” the email read, according to a banking source. It was the first direct communication with banks regarding the loans programme since Saturday’s national lockdown announcement.
The bounce-back loan scheme, which is 100% government-backed, offers firms cheap funding worth up to £50,000. It has so far distributed £40.2bn to 1.3m UK businesses.
One banking source said they were expecting the changes to involve extending the scheme by at least one month, beyond the 30 November deadline.
But one banking executive said businesses would benefit most from being able to apply for a second loan, or a top-up on existing loans given that firms calculated their borrowing needs before the second lockdown was announced.
The scheme does not allow firms to raise their borrowing allowance if they failed to request the maximum sum available – up to £50,000 depending on their turnover.
“It has to be looked at,” the executive said. Sources also speculated that the upper loan limit of £50,000 could be reviewed.
While the chancellor committed to crafting a new government-backed loans programme for 2021, the reality of a second lockdown could put more businesses under pressure without additional emergency funding.
Kevin Hollinrake, a Conservative MP and co-chair of the all-party parliamentary group (APPG) on fair business banking, said firms would be best served by a longer extension to existing schemes into the middle of 2021, rather than trying to come up with a new programme.
He also called for changes to rules that bar firms for asking for more cash under the government scheme.
“Lots of businesses have either not taken loans thinking they could get through it, or they’ve taken a loan of a certain size thinking that would be enough and everything’s changing,” he said.
“I would very much like to see both a longer scheme extended, but also some changes of rules.”
He also said banks should start offering loans to businesses outside their customers base. The APPG estimates that about 250,000 businesses are in effect blocked from emergency funding because they do not bank with one of the accredited lenders, or their lenders are blocked from accessing cheap funding from the Bank of England to support the loans.
The Treasury declined to comment.