Coronavirus: CBI pushes EU over bailout rules for cash-starved firms

Britain’s most influential business group is calling on Brussels for an urgent relaxation of state aid rules amid signs that many companies remain prohibited from accessing emergency funding schemes.

Sky News has learnt that the CBI and counterparts including BusinessEurope are pressing the European Commission to loosen restrictions which mean that companies that were not profitable at the end of last year are not eligible for taxpayer-backed bank loans.

Sources said the CBI was intensifying its lobbying efforts in the wake of data suggesting that the take-up of some government aid programmes – such as the Coronavirus Large Business Interruption Loan Scheme (CLBILS) – had been lower than anticipated.

Figures published by the Treasury on Tuesday showed that just 59 companies had had a total of £359m in state-subsidised loans approved by banks under CLBILS in the weeks since the scheme was launched.

Sources suggested that the latest round of figures, which will be released on Thursday, were likely to indicate that state aid rules were continuing to play a role in curbing the amounts being lent under the initiative.

A CBI spokesperson said: “The EU General Block Exemption Regulation underpins the rules by which businesses can access temporary state aid.

“These were put in place to avoid governments bailing out failing companies, but those rules were established in normal times.

“The scale of the COVID-19 crisis is unprecedented, so business groups across Europe are looking for flexibility from the Commission to ensure otherwise healthy firms do not fall foul of the rules.”

CLBILS provides a government guarantee on 80% of the value of loans of up to £50m made to companies with a turnover of more than £45m.

Sky News revealed last month that bodies representing private equity investors across Europe were lobbying Brussels to amend rules relating to so-called “undertakings in difficulty”, which threaten to stop banks lending to thousands of large companies.

The BVCA, the UK-based lobbying group has written to the European Commission to seek amendments to EU laws mean that companies deemed to be in financial trouble should not access such programmes, owing to the potential risk of distorting competition.

One definition of an undertaking-in-difficulty applied by the EU captures companies which have accumulated losses equal to or greater than 50% of their subscribed share capital.

The commission is said to be examining the issues raised by the various lobbying groups.

Efforts to relax the state aid rules come as two of the leading UK fintech companies join forces to provide £300m of funding to companies under the government scheme to smaller businesses.

Sources said that Starling, the digital bank, and Funding Circle, the UK’s largest small business loan platform, would announce on Wednesday a strategic partnership to channel the money to thousands of SMEs through the Coronavirus Business Interruption Loan Scheme (CBILS).

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