Northern Ireland protocol: Allister discusses 'saving the Union'
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Officials have warned lenders firms may be “ineligible” for the Government-backed loan scheme because the bloc’s rules continue to apply in the region. Treasury chiefs are finalising details of the Recovery Loan Scheme that will replace the £72 billion coronavirus-related support measures from April 6. The new measures are expected to be similar to the current Coronavirus Business Interruption Loan Scheme, which offers 80 percent guarantees for bank loans up to £10m to help firms get through the pandemic.
But officials are having to work up separate rules for Northern Ireland amid fears the scheme could breach the rules of the Brexit divorce deal’s protocol to prevent a hard border.
To keep the Irish border open, the region effectively remains part of the EU’s single market and is in the orbit of the bloc’s state aid rules.
This means the Government’s bailout plans might fail Brussels’ “undertaking in difficulty test”.
The rule bans firms receiving support if they are already in a restructuring plan, in severe distress, or made financial losses more than half of their subscribed share capital.
The Recovery Loan Scheme will operate in Great Britain without the same stress tests to give lenders more freedom to prop up ailing firms.
Sources told the FT the tests banks must impose will be made “simpler and easier” for British companies.
But in Northern Ireland, lenders have been informed by Government officials that they will have to satisfy the EU’s state aid tests.
And some British firms with large operations in the region could also be hit by the Brussels rules.
Angela McGowan, Northern Ireland director for the CBI business group, said: “It’s vital that companies across the UK can access the full range of financial assistance on offer.”
The Treasury will move to focus on offering cash to pandemic-stricken businesses to help them recover, rather than save them.
Terms will be less generous than the “bounce back” loan programme, which has leant more than £45 billion to British firms.
Borrowers face interest rates of up to 15 percent and could be made to make personal guarantees on the debt.
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Ministers have used post-Brexit freedoms to help struggling businesses through the pandemic.
Earlier this month it was revealed the Government would scrap EU-imposed caps to hand out much more generous Covid grants to companies.
Some large firms, including high-street retailers, had complained they had been locked out of the £4.6 coronavirus scheme announced in January because the UK was still following some EU rules.
At the time, business minister Paul Scully said: “Extending our support will help retail and hospitality chains and the thousands of staff they employ.”
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Dominic Curran, property adviser at the British Retail Consortium, backed raising the state aid cap to unlock “funding for retails who have been closed for months on end”.
He added: “Government grants for closed businesses provide essential funding to help tide retailers over during the multiple lockdowns.
“Without this, many businesses would not be able to survive, resulting in shuttered shops and job losses.”
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