Labor shadow chancellor Anneliese Dodds will warn that forcing companies to repay the money they borrowed during Covid-19 to survive will curb investment as Britain tries to get out of the pandemic recover.
In a speech Tuesday evening, Ms. Dodds is expected to say that companies will struggle to repay some of the £ 73 billion in government-backed loans they have taken out since the pandemic began.
Labor said its analysis shows that around 750,000 companies in the UK, with 2.1 million people, have little or no confidence that they could survive three months.
“Forcing companies to start paying off debt before they’re back on their feet will weigh on the amount of money they invest, grow and hire. For some, it could mean hitting the wall, ”Ms. Dodds will say.
“Hundreds of thousands of companies across the country are on a knife’s edge. If they stall or fail, it’s not just a tragedy for the owners who are losing their livelihoods and the employees who are losing their jobs – it will hurt recovery and hold us all back.
“It is a completely wrong economy for the Chancellor to leave this business high and dry.”
The Labor Party previously called for a loan repayment system that mirrors student loans.
That would mean that a company doesn’t have to pay back its loans until it’s profitable again.
Around 1.5 million companies have taken out a bounce back loan of up to £ 50,000 each, with roughly one in four saying they have already spent the money.
The loans were provided by high street banks like Lloyds and NatWest, but the government guaranteed that if the borrowers defaulted, the Treasury would step in to cover the banks’ losses.
In May, the companies should begin with the first repayments.
With the pandemic dragging on longer than expected, Chancellor Rishi Sunak gave companies more options to repay their loans.
The initial six-year repayment period can now be extended to 10 years, and companies can defer repayments and interest payments for a period of six months at any time during that time. You can also choose three six month periods in which you only pay interest on the loans.
The Chancellor billed his new options as “Pay As You Grow,” but Labor said the system was merely a way of delaying payments rather than just paying when a profit is made.
“The Chancellor slept at the wheel. His so-called “Pay As You Grow” scheme may make for a good soundbite, but it’s misleading: there is absolutely no connection to growth. He just pushed the deadlines back a few months, ”Ms. Dodds will say.
“While that might help some companies, the fact is that we are still on track with billions of public money being written off in unpaid loans because the Chancellor refuses to act.”