UK Treasury Nixes Idea For New Coronavirus Funding Scheme

The U.K. Treasury will not be rolling out a proposed emergency coronavirus funding scheme that would have sent billions to providers of supply chain finance, according to Sky News.

The program was nixed after ministers decided it wouldn’t be likely to really help the majority of U.K. businesses, especially small to medium-sized enterprises (SMEs). Two months ago, the Treasury had asked for feedback on the scheme to help funnel more money to businesses hurting for cash in the pandemic.

The plans considered could have involved the Covid Corporate Financing Facility (CCFF), set up to buy commercial paper from large blue-chip companies, being amended so that invoices could flow faster for SMEs. But in recent days, respondents to the Treasury’s inquiry had trouble identifying British SME suppliers. They also said a requirement for large companies to sign the Prompt Payment Code might prevent some of them from joining up.

Instead, respondents recommended continuing on with other programs such as CBILS, CLBILS and BBLS to continue supporting firms in financial trouble due to the pandemic. Tens of billions of pounds have been funneled to small businesses through those three programs, which were set up by chancellor Rishi Sunak.

Those loans, free for the first 12 months, have nevertheless sparked concerns in the banking community about whether the recipients will be able to pay them back later, with the ongoing financial strife from the pandemic.

Some of the big players in the supply chain finance sector include Greensill, of which former prime minister David Cameron is an adviser, Orbian and Prime Revenue, alongside mainstream banks like HSBC and Lloyds Banking Group.

For the borrowers still struggling under the virus’ effects on the economy, regulators have proposed a new grace period and guidelines to hopefully help borrowers remain solvent and keep weathering the pandemic, including more interest-free loans and lower interest rates.