THE amount of money lost to the taxpayer because of businesses failing to repay their Covid support loans could reach £20billion, eclipsing the £4.3bn which may be written off because of fraud.

That is the warning from a restructuring and insolvency expert who says an increasing number of firms are already struggling to repay the loans.

Duncan Swift, Southampton-based partner of Azets in London and the South East, said £73.8bn has been loaned to businesses in Bounce Back Loans (BBLs) and Coronavirus Business Interruption Loans (CBILs), with the government guaranteeing repayments to banks.

There were more than 1.5m BBLs of up to £50,000 or a quarter of annual turnover, totalling £47.4bn.

Last year, the Department for Business, Energy and Industrial Strategy estimated that 37 per cent of BBLs may not be repaid, mostly because the businesses concerned would not survive over the longer-term.

By the end of September 2021, the state-owned British Business Bank, which oversees the scheme, said £1.3bn worth of loans were in default.

Mr Swift said: “A substantial and increasing number of businesses are already struggling to make their CBILs or BBLs loan repayments. Businesses and particularly SMEs have had to endure an exceptionally difficult two years and whilst many have closed, many of those which have persevered have only managed to survive due to the loans and other government-backed interventions, such as Furlough. As a result, we believe that, across the UK, as much as £20bn of all CBILs and BBLs loans will become defaulted in some shape or form.”

“The CBILs and BBLs loan facilities ended in March last year which, coupled with the ending of local authority grants and furlough will be causing severe cash and liquidity problems for more and more businesses.

“Whilst most business owners have no intention of committing fraud, an increasing number are finding that their business lacks the assets, cash or income to meet loan repayment demands and deadlines. Although the banks have been instructed to be flexible, one way or the other loans will have to be repaid.”

He said late payment or non-payment of loans will ultimately be pursued and investigated by HMRC and urged struggling businesses to communicate with their lenders and HMRC and take professional advice.

“Ignoring the loan repayment demands, or only making partial repayments, will simply escalate the problem with all the risks that can bring in terms of the penalties and actions available to lenders and to HMRC,” he said.

“The government is under immense financial pressure and will be pursuing the repayment of these loans whatever their status, be they fraudulent or in default. For businesses struggling to meet loan repayments, the best course of action is to take professional advice to tackle the issue sooner rather than later.”