Sunak has 1.4 million UK companies spread Covid loan payments over a longer period of time

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News on business and economy in the UK

Federal Chancellor Rishi Sunak will present the 1.4 million

The move comes as Sunak continues to be under pressure from opposition Labor Party and corporate groups to step up support for coronavirus-affected companies beyond the spring.

Nearly £ 45 billion has been borrowed from more than 1.4 million small businesses under the Bounce Back program, which offers cheap government-supported bank loans of up to £ 50,000.

Senior bankers fear that many will struggle to repay the money as they emerge from the pandemic in a severely weakened financial situation and with slow return of their customers.

Officials have drawn up plans under a “pay as you grow” structure, first outlined by the Chancellor last September, to facilitate debt settlement.

While borrowers received interest-free loans in the first year, they are slated to begin repaying in May – at which point the pandemic is expected to slow the economic recovery.

Pay as you grow enables companies to extend the duration of their bounce-back loans from six to 10 years, reducing monthly repayments.

As part of the announcement, companies in difficulty can also choose between interest repayments or payment holidays of up to six months.

Banks will start contacting their customers about the new system starting Monday, officials and bank managers said.

Extending it to 10 years will also increase the chances that more companies will operate longer under pandemic-related debt. Bankers have warned that there could be thousands of so-called “zombie companies” left in the UK that, while viable, lack the resources to invest or grow because of the need to pay interest on pandemic loans.

Starting in April, both the bounce-back and other government-sponsored loans to large corporations will be closed to new applicants. The Treasury Department is also ready to cancel the job support program or vacation, where the state pays the wages of millions of people.

The Chancellor is considering extending the business support package until the summer, given the likelihood of a prolonged, longer period of at least partial lockdown.

One option being considered is to extend the vacation through a. to replace less generous incentive for companies to keep employees – Perhaps based on the “job loyalty bonus” of £ 1,000 that the Chancellor brought in temporarily last year.

Labor Party’s shadow chancellor Anneliese Dodds said Friday the vacation program should be radically reformed as part of a wider emergency package and extended indefinitely as long as there are health restrictions.

Dodds said Sunak shouldn’t wait until the March 3 budget to announce the changes. “People cannot afford to wait for the Chancellor to pull themselves together. You need immediate action today, no more procrastination and budget delays, ”she said.

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