Coronavirus latest: Banking boss gives grim verdict on bailout loans system

The scheme has seen just 4,200 firms in Britain get the payment out of 300,000 applicants. This is despite the system already being overhauled earlier this month after firms complained they could not access the cash.

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A sum of approximately £800million has been handed out to British firms in total.

However, this figure nowhere near compares to the £146billion handed to 725,000 companies in the US.

Banks have been overwhelmed by demand since the Coronavirus Business Interruption Loans Scheme was launched on March 23.

Chancellor Rishi Sunak last month said he would do “whatever it takes” to protect jobs as he promised £330billion in state-backed loans.

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Lord King

Lord Mervyn King has said he is ‘worried’ about the Government’s emergency bailout loans system (Image: GETTY)

Lord Mervyn King

Lord Mervyn King has raised concerns about the Government’s emergency bailout loans system (Image: GETTY)

They have been accused of refusing loans due to firms failing to meet complex eligibility criteria.

Lord King, who was governor of the Bank of England during the financial crisis in 2008, said the survival of businesses was key to a rapid economic recovery.

He told Sky News: “The economy will recover quickly only if we can keep the businesses that existed at the beginning of it still functioning and still able to pick up the reins when the epidemic is over.

“If we find so few business loans being granted, something has gone wrong.”

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Bank of England

The scheme has seen just 4,200 firms in Britain get the payment out of 300,000 applicants (Image: GETTY)

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He also stressed the importance of local bank branches and the essential work they do in informing businesses about loans.

Mr King said these branches should not have been closed during the lockdown because they could have helped answer questions of businessess trying to apply for the loans.

However, despite the delay on many businesses receiving their loans, Lord King insists the UK is in a good position to take on large amounts of debt.

Lord King, 72, said: “One of the benefits of being prudent in the last decade is that it is much easier to absorb a rise in the national debt.

Money

They have been accused of refusing loans due to firms failing to meet complex eligibility criteria (Image: GETTY)

Bank of England

A sum of approximately £800million has been handed out to British firms in total (Image: GETTY)

He also stressed the importance of local bank branches and the essential work they do in informing businesses about loans.

Mr King said these branches should not have been closed during the lockdown because they could have helped answer questions of businessess trying to apply for the loans.

However, despite the delay on many businesses receiving their loans, Lord King insists the UK is in a good position to take on large amounts of debt.

Lord King, 72, said: “One of the benefits of being prudent in the last decade is that it is much easier to absorb a rise in the national debt.

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Which countries have escaped the coronavirus? (Image: EXPRESS)

Following the crticism of the loan system. Richard Sharp, Mr Sunak’s former boss at Goldman Sachs, has been called in to oversee the Government’s rescue package.

Business Secretary Alok Sharma said: “I have spent the last couple of days talking directly to some of the largest lenders who are part of this scheme.

“I have been very clear to say to them that we need to get money out of the door as quickly as possible.

“We have set this up at pace and everyone is literally working around the clock.”

Lord Mervyn King

Lord King aid the survival of businesses was key to a rapid economic recovery (Image: GETTY)

This comes after experts predicted that the UK economy was declining at its fastest rate since the 1920s.

More than 1.2million people have applied for Universal Credit in the UK since the start of the pandemic.

The lockdown, is expected to be extended into May – putting yet more strain on companies who have closed and seen their income evaporate.

There are fears in Whitehall that as many as four million people could become unemployed.