True scale of Bounce Back Loan may not be known with £5b lost just the start, warn industry experts

THE true scale of Bounce Back Loan (BBL) fraud is not yet known, with levels expected to soar over the next 18 months, industry experts have warned.

Earlier this year the government announced it had written off close to £5 billion lost to bounceback loan fraud, due to there being no real prospect of recovering it.

Many companies were set up simply to claim the loans - designed to tide businesses over during the pandemic - before going into liquidation, but using the money for purposes could also be considered fraud.

However, with around £47 billion handed out by the government in total, insolvency experts have predicted this could just be the start with many more bounce back loan fraud investigations expected over the next 18 months.

Insolvency practitioners Real Business Rescue analysed company director disqualification cases over the past decade to see what if any impact the pandemic had on the conduct of company directors.

Its report found that 141 company directors were disqualified for Bounce Back Loan related issues during the financial year 2021/22, with levels expected to rise.

Yet, it found levels are rising and in just the last three months there were 125 more cases connected to BBL loan fraud, leading to a combined total of more than 1,000 years of disqualifications.

A Real Business Rescue spokesman said: "Bounce Back Loan fraud and misuse cases are expected to rise significantly in the next 12 to 18 months, far and above the pre-pandemic average.

"It is our prediction based on rising insolvency numbers and the fact that the Insolvency Service is carrying out more investigations than in the previous two years."

Its report, published last week, said: "The government scheme was misused by numerous businesses across the nation. This caused the UK economy to lose an estimated £4.9bn due to fraudulent misuse of the BBL.

"The last three months of data show that at least 125 fraudulent cases of the BBL Scheme have been recorded. With each disqualification sentence averaging at eight years per director, these cases account for a significant 1,003 years worth of lengthy bans.

"We can also see that the pandemic has left an impact on director disqualifications, as the COVID-19 pandemic Bounce Back Loan support has created the second-highest number of cases, with 141 total insolvent disqualifications in the financial year 2021/22.

"Since the loan was introduced, 16,000 businesses that took out a government-backed Covid loan became insolvent and, as a result, failed to pay back the money.

"These numbers are expected to rise significantly in the next 12-18 months, as investigations into BBL fraud and misuse increase."

A Department for Business spokesman said: “The Government is bearing down on fraud in the Bounce Back Loan Scheme and we are working with lenders, law enforcement, and partners across government to recover fraudulently obtained loans.  “We wholly support the Insolvency Service in penalising those who sought to defraud the scheme for their own financial gain.”