The UK has flagged $1.3 billion in COVID rebound loans as a suspected source of fraud

Woman holds British pound banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration

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LONDON, September 2 (Reuters) – The UK government is to release data showing around £1.1 billion in small business loans ($1.27 billion) made under a COVID-19 emergency lending scheme , have already been classified as suspected fraud, a source told Reuters.

Previously unreleased data from the UK’s Department for Business, Energy and Industry (BEIS) gives the first clear indication of the likely level of fraud in the system, which has come under scrutiny over the quality of borrower screening.

UK banks have made a total of £47 billion in government-guaranteed ‘bounce-back loans’ to small businesses hit by COVID-19 lockdowns as of May 2020.

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A release date for the latest report has not yet been set and the data is yet to be finalized, said the source with direct knowledge of the data.

The £1.1bn represents the current level of loans that have been flagged as suspect and more may come to light.

“We continue to crack down on fraud related to COVID support programs and will not tolerate those who seek to defraud consumers and taxpayers,” a government spokesman said.

The support programs were implemented quickly to save jobs, the spokesman said, adding that fraud estimates differ from any losses as some funds may be recovered or repaid.

The government’s current central estimate for bounce-back loan fraud totals £3.3 billion, or 7.5% of total lending, the spokesman said.

In addition to the alleged fraud, banks have called on government guarantees worth £2.6billion on loans that had defaulted, up from £1.6billion in March this year, according to the source.

A further £1.2billion in such claims has been paid out, the source said, up from £350million in claims as of March 31, in data last released on July 28.

The source’s data showed around £28.3 billion worth of loans are being repaid on schedule, while a further £4.7 billion of the total has been repaid in full.

The scheme has long been haunted by concerns about a high risk of fraud, as the government set it up with few checks on borrowers to get cash quickly.

Loans of up to £50,000 apiece have been made available to 1.6 million beneficiaries under the scheme. Parliament’s Budgets Committee estimated in April that loans of up to £4.9 billion could ultimately be fraudulent.

The National Audit Office, which scrutinizes public sector spending, said in December the government had failed to protect itself against fraud relating to the scheme, exposing itself to billions of pounds in losses. Continue reading

A government junior minister, Theodore Agnew, resigned in protest at the winding-up of the program in January, saying efforts to stop the fraudulent abuse of the loans were “deplorable”. Continue reading

($1 = 0.8639 pounds)

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Reporting by Sinead Cruise, additional reporting by Iain Withers, writing by Lawrence White, editing by Alexander Smith

Our standards: The Thomson Reuters Trust Principles.

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