As the UK approaches the five-year mark since the COVID-19 pandemic, we reflect on the vast financial measures extended to businesses. From emergency loan schemes to furlough payments, billions were injected into companies as a lifeline. But what has been the true cost? We examine the long-term impact on the public purse and what this means for businesses today. 

Among the most significant forms of financial support provided was the range of government-backed loan schemes, notably the Coronavirus Business Interruption Loan Scheme (“CBILS”), the Bounce Back Loan Scheme (“BBLS”), and the Coronavirus Large Business Interruption Loan Scheme (“CLBILS”). These were designed to help businesses weather the storm of the pandemic, but as we approach the fifth anniversary since they came into play, questions continue to surface about the financial impact and how much taxpayers have ultimately been left to shoulder.

The financial scale of the loan schemes

The UK government launched a series of loan guarantee schemes to provide quick financial relief to businesses across the country. Here's a summary of the total amount of money that was lent through these schemes:

• BBLS: This scheme, designed to help smaller businesses, provided loans up to £50k. The total amount lent under BBLS reached £47 billion (100% government guarantee).
• CBILS: Aimed at small and medium-sized enterprises (“SMEs”), CBILS offered loans up to £5 million. Around £26 billion was lent through this scheme (80% guaranteed by the government).
• CLBILS: For larger businesses, CLBILS offered loans up to £200 million. Approximately £5.6 billion had been distributed through this scheme (80% government guarantee).
• Future Fund: Introduced to support high-growth companies that were struggling to secure traditional forms of financing. The UK government lent a total of £1.14 billion through investments in over 1,200 companies via convertible loans ranging from £125k to £5 million.

Altogether, these schemes resulted in approximately £80 billion worth of loans being lent to UK businesses, a significant portion of which was backed by government guarantees, aimed at mitigating the risks for lenders.

Other government support

Alongside these loans, the UK's furlough scheme, formally known as the Coronavirus Job Retention Scheme (“CJRS”), cost the government approximately £70 billion during its operation from March 2020 to September 2021.

The scheme was introduced to support businesses affected by the COVID-19 pandemic, allowing employers to retain workers by covering up to 80% of employees' wages (up to £2,500 per month). It helped protect millions of jobs, with over 8 million workers being furloughed at one time at its peak (and 1.3 million employers supported through this scheme during the pandemic).

Defaults, fraud, and the cost to taxpayers

While many businesses successfully repaid their COVID-19 loans, a significant proportion have either defaulted, or are suspected of fraudulent activity, with recent figures suggesting:

• For BBLS, 14.52% of the total loan value, amounting to £6.9 billion, has been settled under the government guarantee, therefore funded by taxpayers. As at June 2024, lenders had flagged £1.8 billion drawn under the BBLS as suspected fraud.
• For CBILS, the government guarantee had been invoked for 3.7% of the total value, amounting to £0.48 billion. Fraudulent activity has been flagged to the tune of £0.04 billion.

The latest figures suggest that £0.43 billion of these loans have defaulted but have not yet been claimed (under the government guarantee) and a further £0.5 billion of loans claimed under the guarantee are yet to be settled. In total, £10.96 billion is the current amount that has been settled and paid out to lenders under the schemes’ guarantee agreements (through the government). 

Putting this total in context, the cost to the government arising from the loan guarantees is almost double the increase in annual defence spending (to 2.5% of GDP) that the government announced in February 2025 (estimated at £6 billion). While these defaults and fraud cases represent a portion of the loans, the true financial burden on taxpayers remains uncertain. The government’s guarantees provided a safety net for lenders, but taxpayers will ultimately bear the cost. These costs could increase further if more businesses fail to repay their loans in full, or if more instances of fraud are detected.

HMRC and the National Crime Agency (“NCA”) have been tasked with investigating fraudulent BBLS applications. In cases where fraud is detected, the government is demanding repayment of the loan. Businesses that fraudulently obtained loans may be required to pay back the full amount, and failure to do so could result in further legal action. The Insolvency Service has actively investigated and prosecuted individuals involved in such fraud some of which have resulted in imprisonment for those involved, and in the less extreme cases have included fines.

COVID’s ongoing impact on struggling businesses

Despite the government’s extensive financial support, many businesses are still struggling, and a common refrain continues to be that "COVID is to blame." Even as the impact of the pandemic fades, the economic fallout continues to be a point of contention. When we are discussing reasons for distress with business owners and management teams, they often still cite COVID-related disruptions as a reason for their ongoing financial challenges.

This has led to a broader discussion about the long-term economic scars of the pandemic. While some businesses have successfully adapted, many have faced ongoing challenges such as increased operating costs, changes in consumer behaviour, and the lasting effects of supply chain disruptions. However, whilst businesses continue to point to COVID as a key reason for their struggles, there are often other structural issues at play.

Whilst COVID-19 undoubtedly caused havoc across the corporate world, the corporate insolvency figures declined markedly during the pandemic as a result of the government support measures that were provided. This suggests that company failures were simply postponed, with the combination of these loans and the furlough scheme merely propping up under performing companies by providing short term life support for struggling entities, significantly increasing the number of “zombie companies” that had been so prevalent during the global financial crisis.

A complex legacy

The UK’s COVID loan schemes provided critical support to businesses during a time of unprecedented uncertainty. With around £80 billion in loans disbursed, the financial relief was significant, and many businesses would not have survived without this necessary intervention. However, as the fifth anniversary of the lockdown approaches, the full impact of these loans remains unclear.

This becomes more challenging to analyse when set against other global events following the pandemic that continue to impact UK businesses such as the war in Ukraine, Brexit, supply chain disruptions, and geopolitical instability.

The government guarantees have covered billions in defaults, and taxpayers are left to foot part of the bill. As the country moves forward, it is crucial to assess the cost of these loan schemes - if, dare we say it, there is ever a repeat or a similar global crisis, policies need to be adapted to ensure an effective and fair allocation of support, less susceptible to fraud, and ones that hopefully minimise any ongoing financial hardship for both UK businesses and the taxpayer.

While the next global crisis may be unpredictable, the lessons from COVID-19 are clear, businesses must be proactive in securing expert guidance. A cross-pillar approach is more critical than ever, providing businesses with holistic, tailored support to navigate financial challenges, uncover new opportunities, and build long-term resilience. By leveraging expertise across service lines businesses can position themselves for stability and success in an ever-evolving landscape. Early engagement with such experts better preserves all options, both solvent and insolvent, across all stressed and distressed scenarios.

Discover more about our cross-pillar approach and service lines here.