UK classified $1.3bn in COVID ‘bounce back’ loans as suspected fraud – source

A woman holds British pound banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration

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LONDON, Sept 2 (Reuters) – The British government is set to release data showing that around 1.1 billion pounds in loans to small businesses ($1.27 billion) provided under a COVID-19 emergency loan have already been classified as suspected fraud, a source told Reuters. .

Unpublished data from the UK’s Department for Business, Energy and Industry (BEIS) gives the first firm indication of likely levels of fraud in the scheme, which has come under intense scrutiny for the quality of checks on borrowers.

UK banks have provided a total of £47bn in government-backed ‘bounce back loans’ from May 2020 to struggling small businesses hit by COVID-19 lockdowns.

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A release date for the latest report has not been set and the data is yet to be finalized, said the source with direct knowledge of the data.

The £1.1bn represents the current level of loans that have been flagged as suspicious, and more may come to light.

“We continue to crack down on COVID support program fraud and will not tolerate those who seek to defraud consumers and taxpayers,” a government spokesperson said.

The support programs were implemented quickly to save jobs, the spokesperson said, adding that fraud estimates would differ from any losses as some funds could be recovered or refunded.

The government’s current central estimate for repayment loan fraud is a final total of £3.3bn, or 7.5% of total loans, the spokesman said.

In addition to the alleged fraud, the banks demanded £2.6bn in government guarantees for defaulted loans, up from £1.6bn in March this year, the source said.

A further £1.2 billion of those claims have been paid, the source said, compared to £350 million in claims as of March 31, according to data last published on July 28.

Some £28.3bn of loans are being repaid on time, the source data showed, while a further £4.7bn of the total have been fully repaid.

The scheme has long been hampered by concerns about a high risk of fraud, as the government set it up with few checks on borrowers in order to withdraw money quickly.

Loans of up to £50,000 each have been provided to 1.6 million beneficiaries under the scheme. Parliament’s Public Accounts Committee estimated in April that £4.9 billion lent could ultimately be fraudulent.

The National Audit Office, which oversees public sector spending, said in December the government had failed to guard against fraud under the scheme, exposing itself to billions of pounds in losses. Read more

A junior government minister, Theodore Agnew, resigned in protest at the running of the scheme in January, saying efforts to end fraudulent loan abuse were “dismal”. Read more

($1 = 0.8639 pounds)

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Reporting by Sinead Cruise, additional reporting by Iain Withers, writing by Lawrence White, editing by Alexander Smith

Our standards: The Thomson Reuters Trust Principles.

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