Construction Could Default on £4.2bn of Bounce Back Loans

Construction Bounce Back Loans - woman clutching head at desk with stress

THE CONSTRUCTION INDUSTRY could cost the Treasury £4.2bn in business and self-employed Bounce Back Loans defaults.

Business Rescue Expert has delved into industry sectors to reveal how small businesses in each sector have managed the Bounce Back Loan Scheme (BBLS). The study examined how much has been borrowed, by whom and what the recipients have done with the funds.

The analysis found that the BBLS could cost the treasury £27 billion in loans that are not repaid. Those losses are equal to the cost of building up to 23 Wembley Stadiums.

Construction Bounce Back Loans

Builders, contractors and other construction industry businesses are the second highest borrowing sector after the retail sector. Construction businesses borrowed during the pandemic a collective £7 billion through the BBLS.

The construction sector also saw the most individual loans taken out. More than 238,000 bounce back loans were granted to construction industry businesses.

BBLS lending by sector 

Rank Industrial Sector BBLS

loans Taken

Total amount lent Average amount per loan (£) Best Case (15%) Median Case (40%) Worst Case (60%)
1 Retail 216,718 £7.7bn £35,530 £1.16bn £3.08bn £4.6bn
2 Construction 238,825 £7bn £29,310 £1.05bn £2.8bn £4.2bn
3 Professional 159,280 £4.5bn £28,252 £675m £1.8bn £2.7bn
4 Hospitality 112,662 £4bn £35,504 £600m £1.6bn £2.4bn
5 Real Estate 85,517 £3bn £35,080 £450m £1.2bn £1.8bn
5 Administrative 102,946 £3bn £29,141 £450m £1.2bn £1.8bn
7 Manufacturing 82,908 £2.6bn £31,360 £390m £1.04bn £1.6bn
8 Transport 77,920 £2bn £25,667 £300m £800m £1.2bn
8 IT & Comms 65,946 £2bn £30,327 £300m £800m £1.2bn
10 Health 58,963 £1.7bn £28,831 £255m £680m £1.02bn
11 Agricultural 41,253 £1.3bn £31,512 £195m £520m £780m
12 Arts 37,741 £940m £24,906 £141m £376m £564m
13 Education 31,241 £726m £23,238 £109m £290m £436m

Chris Horner, Insolvency Director with Business Rescue Expert, said: “The figures illustrate not only the size of the support measures that were available to businesses to borrow during the pandemic lockdown but also the potential cost if they can’t be repaid.

“In the first quarter of this year alone, over 42% of the liquidation cases we’ve handled had taken out a BBLS. The amount borrowed averaged £37,500 per company.

“As the first loan payments for the BBLS become due, businesses will have to seriously look at their ability to pay. Their calculations might have been affected by not being able to reopen earlier than this month at best.

“Businesses that have topped-up their initial BBLS loan will also find out that not only are they unable to defer these payments, but they’ll come out at the same time as their original loan repayments – an unwelcome and expensive surprise.

“The most important thing we can do is to remind business owners and directors that there are options available for them. If they get professional advice quickly then they could yet find a way out of a seemingly impossibly tight situation. Ignoring it is only guaranteed to add to their problems.” 

The full research is available here.

>> Read more about the Bounce Back Loan Scheme in the news

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