The UK government’s first pandemic loan scheme, the £38bn Covid Corporate Financing Facility, has been wound down after all the money borrowed was repaid this week.
Under the CCFF, the Bank of England purchased the short-term debt of large companies, giving them access to cheap finance to keep their operations going. It was the first state-backed loan scheme and launched in March 2020.
At the time, company bosses were worried that the pandemic would prevent them from using traditional financing markets because of uncertainty over the economy and their businesses.
However, the scheme proved controversial because it was used extensively by overseas companies, which were permitted to apply for funds if they had meaningful UK operations and allowed to pay dividends to their investors.
A Financial Times analysis last year showed that more than £2.6bn was given to investors in dividends by overseas-headquartered companies, including US oilfield services group Baker Hughes, Spanish energy company Iberdrola, Mexican industrial conglomerate Orbia, and Australian engineer Worley.
The scheme was also used by football clubs such as Tottenham Hotspur, sparking complaints from executives of rival clubs that were not eligible for loans from the facility.
The CCFF was only open to “investment grade” companies that made a material contribution to the UK economy and it proved popular, providing almost £38bn of support to more than 100 of the UK’s largest businesses.
More than £1bn of the debt that went to companies such as Australian-owned Flight Centre and Gatwick airport, whose majority owner Vinci more than doubled its dividend last year, was still outstanding last month
The Treasury has confirmed that this has been repaid ahead of final maturities this month. It said the scheme had made a profit for the taxpayer of more than £60mn because of the rate of interest applied to the cash, while also protecting millions of jobs.
In a statement, the Treasury said that companies employing almost 2.5m people — including in the car industry, travel, hospitality and high street stores — were directly supported by the facility.
Unlike some of the other Covid loan schemes, none of the money was lost through fraud or default of the borrowers.
“The CCFF scheme ensured that many of the UK’s biggest employers could continue to pay wages and suppliers, protecting millions of jobs — and on top of that every penny has been repaid,” said Rishi Sunak, chancellor of the exchequer.
Mark Burrows, chief operating officer at The Football Association, which used the scheme, said: “The pandemic was a serious challenge for The FA. We were faced with huge losses from cancelled events and competition disruptions affecting our broadcasting rights.
“Being able to rely on the security of CCFF as a quick and cost-effective way to raise working capital meant we were able not only to continue to support our business, but grassroots football across the country.”
Source: Financial Times
