The statement follows today’s (7th October) publication of the National Audit Office’s (NAO) investigation report into the BBLS.

The NAO report stated that, as a result of credit and fraud risks, the Department for Business and the British Business Bank’s preliminary central estimate was that 35% to 60% of borrowers may default on
the loans.

The latest estimates, including those by the bank and the Office for Budget Responsibility, have widened to between 15% and 80% depending on the UK’s economic performance.

Assuming the Scheme lends £43bn, this would imply a potential cost to government of £15bn-26bn. 

However, the report said that actual losses may differ from those forecast and indications of the extent of credit losses and fraudulent applications will not become apparent until borrowers are due to start repaying their loans.

Since the launch of the BBLS, fraud risks have been mitigated by accredited lenders undertaking standard fraud checks as part of the scheme’s application process.

For new business customers, the scheme insists lenders apply their standard anti-money laundering (AML) and Know Your Customer (KYC) checks.

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In addition, the British Business Bank, the government, fraud prevention services, fraud bureaux and the banking and alternative finance sectors have acted swiftly post-scheme launch to put in place additional measures, beyond the standard checks, to further reduce fraud risks. 

The bank has also worked with lenders and HMG colleagues to implement BBLS successfully, including accrediting a range of lenders forming a diverse set of providers under the scheme.

“We have been, and will remain committed to this work, liaising closely with government, lenders and other stakeholders,” said the British Business Bank.

While the report highlighted several areas to consider regarding the future operation of the Scheme, the NAO noted that the government’s Covid-19 emergency loan programme has succeeded in quickly supporting smaller business across the UK to access emergency finance.

According to the report, more than 1.2 million businesses have accessed loans so far, worth £38bn.

The report concludes that the distribution of loans across the UK is in line with the overall distribution of businesses, and around 90% of the loans have gone to micro businesses (with a turnover below £632,000).

The application deadline for the scheme is 30th November 2020.