Report: Fraudulent pandemic-era loans cost UK $1.8 bn

The UK government has reportedly reimbursed banks with $1.8 billion for loans extended to small businesses during the Covid-19 pandemic that were later identified as fraudulent, a notable increase from the $810 million refunded by the end of 2022. Banks participating in state-guaranteed emergency support programs are currently managing a total of £77 billion in loans, raising concerns about the widespread nature of fraudulent activities.

Criticism from the Opposition is mounting, accusing the government of hastily implementing support programs without sufficient consideration for potential taxpayer costs. The Bounce Back Loan Scheme (BBLS), introduced during the pandemic, is at the center of the financial storm, with an estimated 3.75% of loans by value flagged as suspected fraud.

Key program participant Barclays reported that over 6% of its loans could be fraudulent, a significant increase from 2.3% earlier this year. Starling Bank, having lent £1.6 billion under BBLS, also faces scrutiny for suspected fraud on a similar percentage of its loans.

Barclays highlighted its proactive approach in tackling BBLS fraud, emphasizing collaboration with liquidators and a litigation funder. The bank has actively sought the closure of nearly 100 businesses through UK courts to recover Covid-19 debts.

In contrast, the Coronavirus Business Interruption Loan Scheme (CBILS), designed for larger companies, shows a more positive outcome. Only £50 million of the £25.8 billion program is flagged for potential fraud, presenting a stark contrast to the challenges faced by its smaller-scale counterpart.

Lawmakers are now intensifying calls for a thorough investigation into the lapses that allowed fraudulent loans to reach significant proportions. The government, acknowledging concerns, asserts that most businesses have either repaid or are adhering to repayment schedules. However, the reimbursement of $10.79 billion to banks for defaulted loans has heightened scrutiny over the rapid deployment of pandemic support measures.