Economy

Majority of businesses receiving £23bn in Covid grants could have survived without them, report finds

An official report has revealed that most UK businesses that benefited from £23bn in government Covid grants during lockdown would have survived without the financial aid.

According to the Department for Business and Trade’s analysis, only a quarter of the 1.4 million businesses that received state support would have collapsed without it.

The 100-page report, prepared by Ipsos, consultancy Steer, and economist George Barrett, concluded that the majority of companies would have endured the pandemic without the grants. This has intensified scrutiny of the government’s Covid spending, amid concerns of waste and fraud. The National Audit Office (NAO) has already criticised the Bounce Back Loan scheme for its slow implementation of anti-fraud measures, estimating £7.3bn in fraudulent claims related to Covid support schemes.

The findings underscore the broader economic consequences of lockdowns, including the £70bn furlough scheme and the rising number of people on benefits due to long-term health conditions. The UK’s debt is now equivalent to the size of the economy, and mental health-related worklessness is expected to drive up benefits spending.

The report acknowledged that the grants played a role in safeguarding around 300,000 jobs and bolstering economic confidence, but also noted that the cash injections were often misallocated. The speed of the government’s response meant that many businesses that did not need the funds benefited from them, while workers remained in roles that were inefficient in the long term.

Despite the critique, the report concluded that the grants had a lasting impact on employment and helped mitigate the “scarring” effects of the pandemic on the economy. However, it highlighted that only a quarter of the businesses receiving grants lacked the financial reserves to survive short-term disruptions without the aid.

A spokesperson for the Department for Business and Trade emphasised the government’s commitment to recovering waste and fraud from pandemic spending, stating that the report would be carefully reviewed for lessons to be learned.

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