Only 12% of applications for government-backed loans to help construction businesses through the coronavirus pandemic have been approved.
Some 30% were rejected and another 58% are still awaiting a decision, prompting fears of a liquidity crisis in the sector.
The news came following research by the Construction Leadership Council’s (CLC) Covid-19 Taskforce on financial support to the sector.
The CLC is now calling for the loan process to be streamlined, with firms facing pressure on their finances from both the current suspension of projects and the need to invest soon to restart works.
It warned that SMEs are particularly hard-hit as they often do not have the resource to wade through the current application process, shutting them out from much needed support. The taskforce proposes that simple guidance is made available, helping businesses to get a decision.
While some small businesses will benefit from the recently announced Bounce Back Loan scheme, many construction firms will be looking for support above its £50,000 threshold, the CLC warned.
It urged the government to step in if applications remain slow, guaranteeing 100% of loans under the Coronavirus Business Interruption Loan Scheme (CBILS). This would relieve pressure on banks to run a fine-tooth comb over every application, releasing funds that could save SMEs across the sector.
Fast-track applications
The taskforce also recommended that banks should bump applications from companies supporting essential works – such as hospital and utilities construction – to the front of the queue where those from businesses that can show that they are facing immediate hardship.
CLC joint chair Andy Mitchell said: “The government has done an astonishing job putting in place ground-breaking financial support to UK businesses in very short order. The Coronavirus Business Interruption Loan, Coronavirus Large Business Interruption Loan Scheme and Covid-19 Corporate Financing Facility are a shot in the arm for our sector and UK plc.”
“We want to help make sure this vital support makes its way into the industry, providing short-term liquidity as companies get back to work after the covid-19 crisis. We hope to work with the Government and lenders to make sure this happens”
Hannah Vickers, chief executive at the Association for Consultancy and Engineering said: “We looked at Germany which has a single streamlined process only doing its own checks on loans above €3 million and on a fast-tracked self-certificated basis for loans below €10 million. By moving towards a similar model in the UK we can save many vulnerable businesses in our sector.”
