Failure to name firms receiving Covid loans hurts trust in UK, BBB tribunal told

‘Woefully inadequate’ due diligence controls to deter fraud cited in challenge to British Business Bank

The failure to name the companies that received state-backed loans totalling £80bn during the Covid pandemic has put the UK’s reputation as a trusted place to do business at risk, a tribunal has heard.

The warnings by anti-corruption campaigners and a leading fraud expert were made on the first day of a three-day tribunal challenging the state-owned British Business Bank (BBB) and the information commissioner over their decision to keep the names of loan recipients under wraps.

The hearing was prompted by concerns over the misuse of public funds by fraudsters and organised criminals. Campaigners including Spotlight on Corruption, which brought the case to tribunal, claim this fraud could have been prevented in part through greater transparency.

However, the BBB has argued that releasing those names would breach commercial confidentiality between borrowers and the private lenders who distributed the funds, and put borrowers at risk of becoming fraud targets themselves.

David Clarke, a leading fraud expert and former chair of the Fraud Advisory Panel charity, told the tribunal on Monday that money would have been saved and fraudsters deterred had the BBB (which had oversight of the scheme) made it clear it intended to publish the names of recipients when private lenders first started distributing loans.

“The level of due diligence controls put in place … were woefully inadequate and could have been prevented and protected partly by the sharing of the names of those companies,” Clarke said. “Saying you’re going to publish is a great way to first deter [fraudsters] … That’s what I was saying back at the start of the pandemic and it just seems to be ignored.”

He suggested that publishing the information now would give credit agencies and journalists access to a swathe of data that would help under-resourced public bodies identify potential fraud, and ensure there was public confidence in the UK as a place to do business.

“Is it right to let that out to the world? If we want trade to continue, and be able to have trust in the system then yes, we must publish data of businesses [that received loans],” Clarke said.

The business department’s latest estimates suggest taxpayers could be forced to cover at least £2bn of losses due to fraud or error from the popular bounce-back loan scheme, which had fewer checks in order to ensure funds were distributed to businesses at speed.

The scheme handed out £47bn, with affected business applicants able to borrow up to £50,000 each. The government is liable for 100% of the losses if borrowers fail to repay.

Representatives of Spotlight on Corruption argued that the privacy terms attached to the loans, as a result of their affiliation to the BBB, meant borrowers should have expected their information might be publicly disclosed.

But Richard Bearman, the BBB’s director in charge of the bounce-back loan scheme, said disclosing the information would actually raise privacy concerns and erode trust between businesses and their commercial banks, as well as with government bodies.

“These are small businesses in a moment of absolute crisis worrying about their future … Did they foresee potential outcomes like this at that time? I very much doubt it,” Bearman said. “At the heart of it, there is a question of trust. And trust between … us and or government, and with lenders and their customers.”

The tribunal continues.

• This article was amended on 30 November 2022 to correct the estimate of losses from the bounce-back loans scheme. A previous version gave the figure as £3.3bn.


Kalyeena Makortoff Banking correspondent

The GuardianTramp

Related Content

Article image
Treasury mulling 100% government-backed loans for smallest firms
Proposal follows slow take-up of bank lending by companies during Covid-19 crisis

Phillip Inman and Kalyeena Makortoff

24, Apr, 2020 @1:04 PM

Article image
Lloyds rushes to fix flaw that stopped firms receiving Covid loans
Exclusive: UK subsidiary caught in bank’s tangle over government-backed loans

Kalyeena Makortoff Banking correspondent

10, May, 2020 @12:26 PM

Article image
Former minister accuses Starling Bank over Covid loans
Boss of Starling bank defends its efforts to prevent Covid loan fraud after public attack by Lord Agnew

Kalyeena Makortoff Banking correspondent

27, May, 2022 @12:11 PM

Article image
Just 1.4% of firms enquiring about UK coronavirus business loans successful
Business secretary Alok Sharma reveals lack of progress on government’s flagship CBILS scheme

Miles Brignall

12, Apr, 2020 @5:14 PM

Article image
Just £1.1bn of Covid-19 bailout loans have been issued to small UK firms
Critics say banks are failing to meet demand despite doubling number of loans in one week

Kalyeena Makortoff Banking correspondent

15, Apr, 2020 @2:11 PM

Article image
Names of UK Covid business loan borrowers to stay secret, tribunal rules
Ruling says enough scrutiny exists to detect fraud while naming recipients in £47bn scheme puts them at risk

Kalyeena Makortoff Banking correspondent

05, Jan, 2023 @12:15 PM

Article image
Covid fraud: how bounce back loans paid for cars, watches and even porn
As details emerge, concerns grow about Treasury’s efforts to recover almost £5bn wrongly claimed

Jasper Jolly and Kalyeena Makortoff

06, Jun, 2022 @5:00 AM

Article image
Small firms secure £2bn in bounce-back loans in first 24 hours
More than 69,000 struggling UK businesses get funding from coronavirus scheme

Kalyeena Makortoff Banking correspondent

06, May, 2020 @12:40 PM

Article image
Small firms hit by coronavirus could miss out on bounce-back loans
Concern over lack of lenders signing up for state scheme to offer low-cost emergency loans

Kalyeena Makortoff Banking correspondent

05, May, 2020 @5:46 PM

Article image
130K inquiries, 1K loans: why UK government had to tweak help for small firms
Original coronavirus scheme was fiddly, slow and rested too heavily on banks’ judgment

Nils Pratley

02, Apr, 2020 @7:11 PM