Rishi Sunak launches Recovery Loan Scheme to boost UK growth
- Chancellor Rishi Sunak launches highly anticipated Recovery Loan Scheme
- Businesses will be able to access loans and other financial aid, which should help kickstart the economy’s recovery
- Britain forecast to outstrip Europe in growth output for 2021 due to vaccine success
- UK construction sector to be supported by key investment projects and opportunities
Chancellor Rishi Sunak launched the highly anticipated Recovery Loan Scheme on April 6th, which was first introduced to the public during his March Budget announcement.
The new Recovery Loan Scheme (RLS) has replaced the Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS), which were launched in April and March 2020 at the height of the first national lockdown to support businesses that were affected by the pandemic.
Unlike previous loan options, the Recovery Loan Scheme allows businesses to borrow money on standard commercial banking terms, meaning firms will have to pay interest and arrangement fees from the outset.
However, interest rates on the RLS have been capped at 14.99% and are expected to be offered at much lower levels as ministers have urged lenders to keep rates low to help protect jobs.
Chancellor Rishi Sunak launched the scheme ahead of the reopening of non-essential stores, restaurants, hair salons, gyms and other leisure centres to make extra finance available to these firms and help them recover from the pandemic moving forward.
From April 6th, UK firms can apply for the Recovery Loan Scheme and access finance between GBP 25,000 and GBP 10 million. Invoice and asset finance has also been made available, starting from GBP 1,000.
The RLS, which has a multi-billion-pound pot, will operate until December 31st in addition to the newly launched Restart Grant scheme, which will offer eligible firms up to GBP 18,000 in funding to boost growth and help kickstart the economy.
The UK government will also offer 80% security to lenders that offer loans through the new debt finance programme, but no personal guarantee, meaning borrowers are entirely liable for the debt.
Loans accessed through the RLS will be issued by the British Business Bank (BBB) and made available through a diverse network of accredited lenders.
Chancellor Rishi Sunak commented on the new scheme, stating, “as the Prime Minister’s lockdown exit strategy gets underway, our new Recovery Loan Scheme will ensure that UK firms continue to have access to the finance they need as we move out of this crisis.”
He added: “The British government has stopped at nothing to protect jobs and livelihoods throughout the pandemic, and as the situation has evolved, we have continued to prioritise support for businesses.”
Who are the accredited lenders for the Recovery Loan Scheme?
According to the BBB, the current lenders enlisted to the scheme are:
- Arbuthnot Latham
- Bank of Scotland
- Clydesdale Bank
- Danske Bank
- HSBC UK
- Lloyds Bank
- OakNorth Bank
- Skipton Business Finance
- Royal Bank of Scotland
- Ulster Bank
- Yorkshire Bank
Note that some lenders are not offering every type of finance that has been made available through the scheme (Term Loans, Asset Finance, Invoice Finance and Revolving Credit). For further information and to filter accredited lenders, visit the British Business Bank’s website.
The UK government has also said that the RLS can be used on top of support received from other finance programmes such as CBILS, BBLS and the furlough scheme, which was recently extended until September-end.
According to GOV.uk, emergency loans have delivered almost GBP 180BN in financial support since the coronavirus pandemic gripped the nation last March, while the furlough scheme has paid cash to 11.4 million people.
With the next phase of UK Prime Minister Boris Johnson’s lockdown exit roadmap strategy given the green light, the launch of the new Recovery Loan Scheme will offer businesses a fighting chance to rebuild better from the pandemic as the economy reopens.
It comes as a survey of 149 British companies conducted by Make UK revealed that nearly 50% of participants said that business had improved in 2021.
While 26% of firms admitted that they don’t believe output will return to pre-pandemic levels for the next six to twelve months, the lobby group said that the measures Chancellor Rishi Sunak announced in his March Budget sparked a comeback for factories.
Outlook for the UK construction and manufacturing industries brighten
Industry group, Make the UK revealed that more than half of firms surveyed said that they planned to bring forward investment proposals courtesy of the measures announced by Mr Sunak during his Budget statement and a pick-up in trade since the beginning of the year.
Economists have attributed the pick-up in trade and growing business confidence to the UK’s vaccine success, which is expected to enable a swift economic rebound in the second half of the year.
While the economic disruption caused by COVID-19 and ongoing post-Brexit challenges will continue to weigh on crucial sectors of the economy, such as UK construction, Britain is forecast to outstrip the US and Europe in terms of economic growth over the coming years.
According to the International Monetary Fund’s (IMF) World Economic Outlook report, Britain will be the fastest-growing leading economy in 2022.
Despite suffering one of the worst economic contractions of any other advanced economy in 2020, the IMF expects UK output to grow by 5.3% in 2021 and 5.1% in 2022 – the most substantial growth since 1988.
Aside from the consumer spending boom, which is expected to be unleashed as the economy reopens, the UK government’s commitment to “Build Back Better” with science and innovation should boost Brexit Britain’s growth.
The British government’s “Build Back Better” plans aim to boost the economy by levelling up every part of the UK while supporting a move to net-zero emissions to ensure growth is both green and sustainable.
The proposal includes a GBP 600BN public sector investment over the next five years, a GBP 100BN capital investment into UK infrastructure and GBP 12BN worth of funding to boost Britain’s green recovery, which should also create up to 250,000 job opportunities by 2030.
Chancellor Rishi Sunak’s new support packages should also support output in industries such as manufacturing and construction, with the latter expected to rebound and expand by 8% in 2021.
After that, ResearchAndMarkets.com expects the UK construction industry to record an average annual growth of 2.5% between 2022 and 2025 as investor confidence improves and investments in infrastructure projects and renewable energy create new opportunities for the sector.