Third year evaluation of the Covid-19 loan guarantee schemes finds businesses self-reporting a high impact on survival, and most realistic scenario finding overall economic benefits of £77bn

• Net benefits for the UK economy amounted to £35.9bn through BBLS, £33bn through CBILS and £7.9bn through CLBILS
• The schemes’ overall benefit to cost ratio was approx. 3.8 under the most realistic scenario, demonstrating that they provided value for money

The third report of the multi-year evaluation of the Government’s Covid-19 loan guarantee schemes finds hundreds of thousands of businesses could have closed and up to 3.5m jobs could have been lost without the £77bn of lending guaranteed under the schemes.

Further, this third report finds an overall economic benefit of £77bn in additional Gross Value Added.
Commissioned by the British Business Bank from London Economics and Ipsos, the report provides an updated assessment of whether the objectives of the schemes were satisfied and their impact, a process evaluation and, for the first time, an assessment of the schemes’ value for money.

In March 2020, in response to the global pandemic and corresponding wide-ranging business impacts and uncertainty, the government rapidly designed and deployed a series of three loan guarantee schemes – the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Bounce Back Loan Scheme (BBLS). These aimed to support businesses across the UK which were experiencing lost or deferred revenues, leading to disruptions to their cashflow.

Self-reported survey data 

In the first analysis conducted for this report, borrowers were surveyed about the impact of the schemes on their survival three years on from the pandemic, as they had been the previous two years.

Analysis of these self-reported impacts suggests that an additional 153,000 to 642,000 BBLS borrowers and 5,000 to 27,000 CBILS/CLBILS borrowers may have permanently closed between March 2020 and December 2022 without access to the Covid-19 loan guarantee schemes. Overall, this means that an estimated 158,000 to 669,000 borrowers could have permanently closed by December 2022 in the absence of the schemes.

This compares to an estimated 146,000 to 505,000 BBLS, and an estimated 5,000 to 21,000 CBILS/CLBILS borrowers reported in the year one evaluation, and an estimated 175,000 to 618,000 BBLS and an estimated 4,000 to 25,000 CBILS/CLBILS borrowers reported in the year two evaluation.

Secondary data analysis

A further analysis was undertaken using a different methodology and data set to look at second-year impacts. This used an econometric analysis of secondary data from the Inter Departmental Business Register (IDBR) rather than by directly surveying borrowers. This approach is considered to be the most robust as it is based on a larger sample size and relies on observed outcomes (instead of self-reported ones). 

The secondary data analysis found that the schemes prevented closures among an estimated 87,000 and 118,000 of BBLS and an estimated 4,300-5,100 of CBILS/CLBILS borrowers between March 2020 and March 2022.

While these impacts are higher than the ones estimated for the March 2020-March 2021 period, they are lower than estimates based on businesses’ self-reported impacts two years on from the pandemic, particularly for BBLS. The econometric analysis does, however, find a positive and statistically significant impact of the BBLS and CBILS/CLBILS schemes on borrowers’ turnover, at 7% higher than it would have been in the absence of the schemes, as well as on borrowers’ employment (8% higher for BBLS borrowers and 12% higher for CBILS/CLBILS borrowers. 

In contrast, the Year 2 report’s econometric analysis of survey data did not find a robust and statistically significant impact of the BBLS or CBILS/CLBILS schemes on borrowers’ turnover.

These estimates are lower than those related to the impact on borrowers’ turnover in the first year of the pandemic - respectively 10% and 12% for BBLS and CBILS/CLBILS- suggesting that the finance received under the schemes played a larger role in allowing businesses to continue their turnover generating operations in the first year of the pandemic than the second.

Value for money

The report assesses value for money of the schemes using three separate scenarios – ‘Core’, ‘Pessimistic’ and ‘Most Pessimistic’.

The ‘Pessimistic and ‘Most Pessimistic’ scenarios purposely take an increasingly negative view of the longevity of benefits and impacts in order to stress test assumptions about the schemes and inform decisions about future policy and scheme design.

Under the most realistic ‘Core’ scenario, it is estimated that the overall combined benefits of the schemes are around £77bn – £35.9bn through BBLS, £33bn through CBILS and £7.9bn through CLBILS. In this scenario, the corresponding benefit to cost ratio for the three schemes combined was approx. 3.8, demonstrating that these provided value for money.