David Buik: Tories could lose next election over coronavirus loans delays
Top City commentator David Buik has warned the slow payment of coronavirus loans to businesses could mean the Tories lose the next election.
Canada’s veteran financial pundit has urged chancellor Rishi Sunak to “rethink” the government’s stance on loans to businesses hit by coronavirus, with UK lending far outstripped by other countries.
Earlier this week Sunak said he was “not persuaded” the government should underwrite 100 per cent of coronavirus loans.
That means banks, which have faced criticism for slow lending rates, are taking on 20 per cent of the risk.
Speaking to City PM editor Christian May on City PM’s daily City View podcast today, Buik said: “[Banks] are under a lot of duress and they’re not playing ball, they’re saying we don’t think you can repay the money on this so we’re not going to give it to you.
“[Sunak is] going to have to have a rethink, because this money’s not going to get through and we’re going to have a big problem.
“This loans scheme that Sunak put forward – which I thought in principle was a good thing – that could be an election loser.”
Banks are coming under pressure to publish data on coronavirus loans they have made. Sunak has said 12,000 applications have been approved, amounting to lending past £2bn. But most banks have not revealed how many loans they have made.
Royal Bank of Scotland – now known as Natwest – has lent out £937m to 5,600 businesses, City PM understands. That amounts to around half of all coronavirus loans so far.
Veteran City analyst Buik criticised the pace of lending so far.
SMEs will fail without coronavirus loans soon
The UK is far behind Switzerland, whose banks lent out $15bn within a week of announcing the loans. Meanwhile, the US has already lent out the entirety of a $350bn (£284bn) rescue fund for small businesses.
“When you consider the US lent out $325bn to the doorsteps of everybody because they had regional banks in every single one of the 51 states so they could get the thing done [quickly], we don’t have that,” he said.
“People are at breaking point,” Buik warned. “For SMEs, if they don’t get this done certainly this week or the end of April, they’re going to go down. They’re going to be beyond redemption and I think that is deeply unfair.”
He called for a simpler method using digital technology to speed up approval of coronavirus loans.
“It’s got to happen. In fairness to Sunak, he said ‘I have some great ideas’, but the problem is logistics. We had a crisis 12 years ago surely we should have learned something from it.”