Across Europe, government-backed business loan schemes in Germany, France and Switzerland have been quicker to distribute emergency funding during the coronavirus outbreak than those in the UK, where teething problems put the British programme weeks behind mainland rivals. The UK’s coronavirus business interruption loan scheme (CBILS), which was initially fraught with controversy over demands for personal guarantees, took a month to distribute 18,595 loans worth £3.1bn. But the pace of approvals jumped following the introduction of two additional programmes, including the bounce-back loan scheme that handed £2bn to 69,000 Britain’s smallest businesses within the first 24 hours of its launch on 4 May. Seven weeks in, the UK is finally catching up, having handed almost £15bn to more than 304,000 firms But why did the UK struggle to keep up with its European peers in the first place? Experts say the answer may be linked to borrowing trends, the nature of Britain’s financial system, and the UK’s relationship with government spending. The schemes at a glance CBILS relies on banks lending out their own cash. However, it comes with a guarantee that the government will cover 80% of losses if a customer defaults and the bank cannot recover the full amount. The Treasury has amended the programme twice since its launch on 23 March, following a backlash over the terms and the slow pace at which the loans were being processed. Two new schemes have since been launched: one for larger firms – known as CLBILS – and the fast-tracked bounce-back loan scheme, which come with a 100% guarantee and an attractive flat interest rate of 2.5%. In comparison, France launched a €300bn (£363bn) scheme for business loans which came with a 90% government guarantee, regardless of the company’s size. The state has since announced plans for 100% guarantees for companies that have struggled to secure funding, and has an ombudsman to help firms who have been rejected. In Germany the state originally pledged to guarantee up to 90% of private loans but has since agreed to increase that to 100%. In Switzerland, banks are offering 100% government-backed loans worth up to 500,000 Swiss francs (£425,205), and an 85% guarantee for loans of up to 20m Swiss francs. A fragmented UK banking system After a boom in UK bank takeovers in the lead-up to the 2008 financial crisis, regulators have tried to boost competition and even encouraged businesses to shift accounts to smaller lenders. Neil Shearing, chief economist at Capital Economics, says this fragmented system may be partly the reason for the UK scheme’s teething problems. For example, the UK’s CBILS programme was launched with 40 banks on board. “In countries where the system is quite concentrated – with one, two or three big banks – in a sense it’s easier to get these schemes off the ground. It just requires one Zoom call where you can thrash issues out and it makes the implementation phase much easier,” he said. He pointed to Switzerland where Credit Suisse has played a “huge role” in developing and implementing the scheme. “That’s not the case if a system is much more fragmented … there’s advantages in terms of competition but not when you need something done quickly.” While the new bounce-back scheme was put together with just seven British lenders to start, most are only offering loans to their own customers. That has raised fears that small businesses that have been encouraged to open accounts with challenger banks in recent years could end up being locked out of the scheme, or waiting weeks until their own lenders are accredited. The UK is more used to monetary than fiscal stimulus The UK’s £330bn coronavirus business support programme is the largest in the country’s history, but European peers are far more experienced when it comes to distributing state-backed cash and may have been able to get money flowing much quicker as a result. Countries such as France and Germany “derive some benefit from experience”, said Florian Hense, an economist at Berenberg. “They have the facilities in place and businesses have the attitude and proclivity to ask the government, in times like these, for help.” The UK has instead relied heavily on monetary policy for economic stimulus, which tends to be faster and does not require tax hikes or an increase in government borrowing. The state-owned British Business Bank, meanwhile, is not used to managing programmes the size of CBILS and bounce-back loans. It has had to increase staffing and is still building new digital programmes to handle demand. CASE STUDIES Electronic filter maker in Durham, UK Anj Hampton, 45, is a director at Rasmi Electronics in Durham. The firm makes electronic filters that ensure radio frequencies from one machine do not disrupt another. The family-run business exports about 85% of its stock to Europe, but also sells to firms that supply the NHS at home. After factories shut down in China this year, Anj was struggling to get parts and fulfil orders and eventually had to send staff home. After three months, she was facing a cash squeeze and was looking for £200,000 to bridge the gap. She approached NatWest five weeks ago but was wrongly told that exporters were not eligible for CBILS. Anj said she put together evidence from the British Business Bank showing that she was still entitled to access the scheme but has not yet been granted a loan. The BBB’s website has since been changed to clarify that exporters do qualify, but she’s still waiting for funding. Property engineering firm in Paris, France Eric Malenfer, 55 is the CEO of Gexpertise Conseil, which helps design, survey and model buildings in both France and Tunisia. He had to cut his 220 staff down to part-time work after France went into lockdown last month and was looking for €2.5m in emergency loans to stay afloat. He approached both Credit du Nord and HSBC in France for a total of €2.5m. The application process took about two weeks, which he said was “particularly short”, and he received the cash a week later. “The state reacted very quickly and the banking arrangements were implemented within deadlines that we did not imagine possible,” Malenfer said. Cinema and events space in Frankfurt, Germany Andreas Lucas, 56, is the managing partner of Orfeo’s Erben, a restaurant, bar, cinema and events space in Frankfurt, Germany. The site had to close on 18 March as the pandemic started to spread, and he had to put his staff on part-time furlough. He secured a €30,000 grant and a separate €35,000 micro-loan through the Wirtschaftsbank Hessen state development bank to help cover rent, staff benefits, and maintenance during the outbreak. He said it took less than 10 days between starting the application and receiving the cash. Lucas said it was “one of the least bureaucratic” experiences he has had in the past 30 years.