Barclays Seeks to Shut Dozens of Firms That Haven’t Repaid Covid Loans

(Bloomberg) — Barclays Plc has asked UK courts to shutter nearly 100 businesses in recent months as it seeks to recover money loaned under a government Covid-19 program that’s been blighted by fraud. 

The bank has sought winding-up petitions, which liquidate companies to pay debts, against at least 97 businesses since September, according to official records. The requests relate to loans of around £50,000 ($57,728) that Barclays gave to small businesses to help them get through the pandemic.

The government’s Bounce Back Loan Scheme encouraged banks to lend by guaranteeing any shortfall in repayments. Barclays was the biggest lender in the program, issuing almost 350,000 loans with a value of more than £10 billion. 

In March last year, the Department for Business, Energy and Industrial Strategy estimated that 11% of all loans issued under the BBLS program, with a value of £4.9 billion, could be fraudulent. The total losses remain uncertain as repayments continue to fall due. 

Barclays brought a number of petitions before a London court last Wednesday, all of which related to Bounce Back loans, according to Judge Clive Jones. 

In pleading for the companies to be liquidated, a barrister acting for Barclays detailed how notices were physically served on the directors of the firms that took the loans — and the problems that emerged during this process. 

One company had a registered address at a building site, according to the barrister. In some cases, a Barclays representative tried to serve a petition at the firm’s registered address, only to be told that the occupiers had never heard of the company or the directors. One petition was left on the bar of a closed restaurant. 

“It sounds rather as if this might be a false application in the first place, but I make no decision about that,” Judge Jones said as he granted an order to wind up one of the companies.

Payback

“Barclays looks to support customers who are facing financial difficulty, including those who borrowed under government schemes,” George Shorrock, a spokesman for Barclays, said in an email. “However, in certain circumstances, including where there appears to be a misuse of funds, formal recovery action may be taken to recover taxpayers’ money.”

BBLS loans were issued at speed while the UK went through Covid lockdowns, leading to criticism from the National Audit Office and other bodies for not doing enough to protect public funds. Arrests have been made in connection with fraudulent claims, and the Insolvency Service has struck off a number of directors for defrauding the program.

Lenders were accredited to issue loans by the British Business Bank, a government-owned economic development bank, in 2020. Loans issued under the BBLS program are 100% guaranteed by the British government, and banks can make a claim if the business fails to pay back the loan.

While most firms have repaid their BBLS loans or remain on track with repayments, lenders have flagged £1.1 billion of loans as fraudulent. Barclays suspected that more than £250 million of loans it made were fraudulent as of July.

—With assistance from Evelyn Yu.