Background to the report

This investigation is one of a series of National Audit Office (NAO) reports considering government’s response to the COVID-19 pandemic. The Bounce Back Loan Scheme (the Scheme) provides registered and unregistered businesses with loans of up to £50,000, or a maximum of 25% of annual turnover, to maintain their financial health during the pandemic. The Scheme launched on 4 May and will be open until 30 November, with government retaining the right to extend the Scheme.

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The loans are provided by commercial lenders (for example, banks, building societies and peer‑to‑peer lenders) directly to businesses, who are expected to repay the debt in full. Failure to do so may have a negative impact on their credit score and may affect their ability to borrow in the future. Government provides lenders a 100% guarantee against the loans (both capital and interest). This means if the borrower does not repay the loan, government will step in and repay the lender. HM Treasury data shows that as of 6 September, the Scheme delivered more than 1.2 million loans to businesses, totalling £36.9 billion.

Content and scope of the report

The report focuses on this Scheme as it is government’s largest and most risky business loan support scheme. It provides a factual overview of the government’s actions and covers:

  • how the Scheme was developed, what it aims to achieve and how it is managed (Part One);
  • the Scheme details and how it performed to date (Part Two); and
  • the main Scheme risks (Part Three).

The report does not assess the value for money of the Scheme, as loan repayments will not start until May 2021 and there is not yet enough information on the Scheme’s costs and benefits.

Concluding remarks

Once government decided to support small businesses facing cash flow problems owing to the pandemic, it moved very quickly to set up a scheme. It prioritised one aspect of value for money – payment speed – over almost all others and has been prepared to tolerate a potentially very high level of losses as a result. These losses can stem from businesses wanting to pay back loans but finding themselves unable to, through to organised criminals taking out loans with no intention of ever paying them back. The Scheme achieved its initial objective of quickly supporting small businesses, but a lack of more detailed Scheme-specific objectives will make it difficult to measure its ultimate success. Systems and processes have evolved since the Scheme launch but much hard work remains over the coming months and years to ensure that the risks to value for money are minimised. This work must include implementing a robust debt collection plan with lenders and fraud investigation arrangements. Government should also take this opportunity to consider now the controls it would put in place to protect against fraudulent abuse for any future schemes.

Read more about our work on the government’s response to the coronavirus pandemic.

“With concerns that many small businesses might run out of money as a result of the COVID-19 pandemic, government acted decisively to get cash into their hands as quickly as possible.

“Unfortunately, the cost to the taxpayer has the potential to be very high, if the estimated losses turn out to be correct. Government will need to ensure that robust debt collection and fraud investigation arrangements are in place to minimise the impact of these potential losses to the public purse. It should also take this opportunity to consider now the controls it would put in place to protect against the abuse of any future such schemes.”

Gareth Davies, head of the NAO

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Press release

View press release (7 Oct 2020)

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