The government's Covid-19 loan guarantee schemes delivered a substantial £77 billion boost to the UK economy and prevented the potential closure of hundreds of thousands of businesses, according to a newly released evaluation by the British Business Bank.
The third annual report, conducted by London Economics and Ipsos, assessed the impact and value for money of the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS), and the Coronavirus Large Business Interruption Loan Scheme (CLBILS).
The report highlights that without the £77bn in lending guaranteed by these schemes, between 158,000 and 669,000 businesses could have permanently closed by December 2022 and up to 3.5 million jobs could have been lost.
Further, the report finds an overall economic benefit of £77bn in additional Gross Value Added.
The evaluation found significant net benefits across all three schemes. The BBLS contributed £35.9bn to the UK economy, while CBILS added £33bn and CLBILS a further £7.9bn. Crucially, under the most realistic scenario outlined in the report, the overall benefit to cost ratio of the schemes was approximately 3.8, indicating they provided strong value for money for the taxpayer.
The schemes were rapidly implemented in March 2020 to support businesses grappling with lost revenue and cashflow disruptions caused by the pandemic. This latest report builds on previous evaluations, incorporating self-reported data from borrowers three years on from the initial crisis and, for the first time, a comprehensive assessment of the schemes' financial efficiency.
Self-reported survey data indicated a considerable impact on business survival. Between 153,000 and 642,000 BBLS borrowers and 5,000 to 27,000 CBILS/CLBILS borrowers believed they would have closed permanently without the financial support.
A separate analysis of secondary data from the Inter Departmental Business Register (IDBR) provided a more conservative estimate of the impact on closures, suggesting that the schemes prevented between 87,000 and 118,000 BBLS closures and 4,300 to 5,100 CBILS/CLBILS closures by March 2022. This analysis also found a positive and statistically significant impact on borrowers' turnover (seven per cent higher) and employment (eight per cent higher for BBLS, 12 per cent higher for CBILS/CLBILS) compared to a scenario without the schemes.
While the impact on turnover appeared to be greater in the initial year of the pandemic, the report underscores the vital role the loan schemes played in enabling businesses to continue operating and maintain employment during a period of unprecedented economic uncertainty.
