Millions dished out to inactive or new companies under covid loan scheme
Lenders reportedly dished out a whopping £130m to questionable companies under a government Covid support scheme.
An investigation by Bloomberg found that 60 companies which accessed government funds under the Coronavirus Business Interruption Loan Scheme were reported as being dormant whilst 85 had been created within weeks of submitting an application.
Given that the scheme was supposed to support small and medium sized firms that could prove the impact of coronavirus on business the fact loans of up to £5m were handed out to companies without assets or a turnover raises red flags. The government guaranteed to repay lenders 80 per cent of the cost of the loan in the case of default, putting taxpayer funds at risk in the process.
Covid loans
EU state aid records show that a £1m loan went to a company that was dormant before the pandemic’s onset and then went into liquidation less than a year after receiving the funds.
Another company, Tempus Court Developments, borrowed £3.7m in November 2020 according to EU records. However, the company has filed accounts as dormant since 2018, it has just £60 of assets according to Companies House and it did not trade in the year ending 31 July 2021.
Beckwith, a Conservative Party donor who owns the company, refused Bloomberg’s request for comment and referred reporters to his son who claimed that the loan was used to refinance borrowings secured against properties that are owned by a parent company which is not dormant.
Another company, Blue Ocean Topco Holding was founded by former investment banker, Gregory Pezzella, and incorporated on 12 August 2020, after coronavirus restrictions began causing disruption to businesses. Within two days the company had obtained taxpayer-guaranteed loans to the tune of £4.7m.
Another Pezzella-owned firm, Blue Ocean Midco Ltd, also borrowed £3.2m through the covid business interruption loan scheme a month later. The company is now in administration according to filings on Companies House.
Government Response
The loan scheme was delivered jointly by the Department for Business Energy and Industrial Strategy, HM Treasury and the British Business Bank which administered the scheme and lent to companies via third party lenders.
In a statement, a spokesperson for BEIS told Morning Wire “we are continuing to crackdown on Covid-19 fraud and will not tolerate those that seek to defraud the British taxpayer. We are working closely with lenders and enforcement authorities to detect and investigate fraud.”
“Government support schemes have provided a lifeline to millions of businesses across the UK – helping them survive the pandemic and protecting millions of jobs,” the spokesperson added.
The revelations come after a recent BEIS report into Greensill, which was approved as a lender under the Coronavirus business interruption loan scheme as well as a loan scheme for larger companies, concluded that the government “did not strike the correct balance between managing decisions quickly and protecting taxpayer’s interests.”
Greensill collapsed into administration in March 2021 exposing £355m of taxpayer’s money to increased risk.
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