The COVID-19 pandemic has had a significant impact on the global economy, with small and medium-sized enterprises (SMEs) being particularly affected.
In response, the UK government implemented a variety of measures to support these businesses, including the provision of government loans.
This article explores the statistics of these loans and their impact on the UK SME market.
The COVID-19 Pandemic and Its Economic Impact
The COVID-19 pandemic caused major social and economic disruption worldwide.
The UK, like many other countries, implemented lockdown measures to curb the spread of the virus, leading to a sharp drop in economic activity.
The magnitude of the recession caused by the pandemic is unprecedented in modern times, with the UK’s GDP declining by 9.7% in 2020, the steepest drop since consistent records began in 1948.
SMEs, which account for 50% of the total revenue generated by UK businesses and 44% of the labour force, were hit harder than larger businesses.
A survey conducted in November 2020 revealed that 52% of the 653 SMEs surveyed said they could be out of business in fewer than 12 months under the trading conditions of the time.
Government Loans to Support SMEs
In response to the economic crisis, the UK government implemented a series of financial measures to mitigate the impact of restrictions.
These measures included the provision of government-backed loans to businesses.
As of May 2021, over 1.67 million loans had been provided, protecting millions of jobs and livelihoods across the UK.
The government-backed loan schemes supported businesses of all sizes across the UK, ranging from big manufacturers and exporters which received Coronavirus Large Business Interruption Loans (CLBILS) loans, to innovative tech companies which benefited from the Future Fund, as well as the millions of smaller businesses which received a Bounce Back Loan (BBL).
Statistics of Government Loans
The latest figures from the Office for Budget Responsibility (OBR) estimate that government Covid support measures totalled £169bn since 2020.
Most of this extra spending went to individuals, at £100bn, with the remaining £69bn spent on business support schemes.
More than 1.5 million Bounce Back Loans worth £47 billion were provided during the pandemic, with £26 billion also provided as Coronavirus Business Interruption Loans (CBILS) as well as over £5 billion worth of CLBILS.
A further £1.13 billion of funding has been provided to 1,190 high growth firms through the Future Fund.
Impact on the UK SME Market
The government loans have had a significant impact on the UK SME market.
A study conducted by the Bank of England using a novel dataset comprising monthly information on all 2 million SMEs that have current accounts or debt with nine major banking groups revealed that the virus and the public health interventions coincided with a 30 percentage point reduction in turnover growth for the average SME.
However, cash flows were broadly flat on average and there was much less heterogeneity across SMEs.
The government loans have provided much-needed liquidity to SMEs, allowing them to continue operations and retain employees during the crisis.
The loans have also helped to mitigate the impact of the reduction in turnover growth.
The COVID-19 pandemic has had a significant impact on the UK SME market.
In response, the UK government implemented a variety of measures, including the provision of government loans.
These loans have provided much-needed support to SMEs, allowing them to continue operations and retain employees during the crisis.
As the UK moves towards recovery, the impact of these loans will continue to be felt in the SME market.