Barclays is joining forces with an insolvency specialist to try to recover millions of pounds of misappropriated loans advanced under the UK government’s Covid-19 bounceback scheme.
The bank is among the lenders that provided loans of up to £50,000 to small companies at the height of the Covid-19 pandemic, which were guaranteed by the government.
About £46bn was given to companies with only minimal eligibility checks to encourage banks to lend quickly. The loan scheme has attracted controversy as official estimates suggest UK taxpayers now face losses of more than £1bn from fraudsters who exploited the programme.
Barclays, the largest bank lender in the bounceback loan scheme, advancing £10.8bn, has joined forces with Manolete Partners, an insolvency litigation financing company.
The pilot scheme to recover the money, which runs until June 2023 and is under supervision from the British Business Bank, covers more than 100 companies that have defaulted on bounceback loans. The project is being closely watched by other high street banks.
Steven Cooklin, chief executive of Manolete, said other banks needed to start taking action. “The longer they wait to engage with us the more likely that the target directors will have dissipated the bounceback loan monies and the less we can therefore return to the taxpayer,” he said.
Cooklin added that in practice many directors who faced the threat of legal proceedings against them personally would usually opt to settle rather than face court action — and in certain cases the bounceback loan money did not even appear to have been spent.
“In some cases loans went out of business accounts into personal accounts. There seem to be a lot of directors who have tucked the money away and think if someone comes knocking on the door I’ll give it back,” he said.
Through the scheme, Barclays would issue a winding up petition against non paying companies, which would then be put into compulsory liquidation administered by the official receiver.
The official receiver would continue to act as liquidator or appoint a large insolvency practitioner to administer the company liquidation — after which Manolete would buy the right to pursue directors of the insolvent company through the courts. When money is recovered from directors, Manolete would receive its costs back and split the remainder with Barclays.
Barclays said: “We have an active programme to investigate fraud and we are working closely with the BBB [British Business Bank] and other government agencies to ensure that we are following proportionate recovery action.
“We utilise debt collection agencies and use our rights as lender to take civil enforcement action. Where appropriate, we inform law enforcement agencies about borrowers where we suspect criminal wrongdoing.”
The Department of Business, Energy and Industrial Strategy said: “The government is cracking down on fraud in the bounceback loan scheme — working with lenders, law enforcement, and partners across government to recover fraudulently obtained loans.”
It said the National Investigation Service had recovered £3.8mn in 2021-22 exceeding its target of £2mn.