Lenders have proposed that loans undertaken during the COVID-19 pandemic should be converted into a tax debt repayable over a decade, much like student loans, the money would only be repayable if and when the businesses can afford it.

A similar scheme was proposed last month by the Institute of Directors.

UK banks are worried that up to 800,000 firms employing 3 million people across the UK could go bust in the next year if they cannot defer repayments on government-backed loans.

Banks want the scheme to be administered by HM Revenue and Customs. HMRC would have the operational horsepower, existing relationships with, and adequate knowledge of, companies to be able to manage and implement a programme of this scale.

Banking industry lobby group TheCityUK is proposing to set up a “UK Recovery Corporation”, through which firms could convert their short-term debts into a long term financial payback scheme to HMRC, BBC News reports. 

Banks have argued that this would be far simpler and faster to arrange and administer, than the UK government taking ownership stakes in hundreds of thousands of companies across the UK. 

• Read all of our articles relating to COVID-19 here.