Background information

This measure is part of the raft of support introduced as part of the Budget 2020 policy response, with this scheme being designed by the Bank of England in conjunction with HM Treasury. The Coronavirus Act 2020 is the major piece of legislation covering the government response.

As part of the further measures announced on 17 March, the Bank of England and the Treasury launched a Covid Corporate Financing Facility (CCFF). This recognises that prior to the crisis, companies often sell short-term debt ('commercial paper') to the market as a quick and effective way of raising working capital/ Thus, under CCFF, the Bank of England will instead buy this short-term debt.

Content of measure

As part of the further measures announced on 17 March, the Bank of England and the Treasury launched a Covid Corporate Financing Facility (CCFF). This recognises that prior to the crisis, companies often sell short-term debt ('commercial paper') to the market as a quick and effective way of raising working capital/ Thus, under CCFF, the Bank of England will instead buy this short-term debt.

The scheme then aims to "…help businesses across a range of sectors to pay wages and suppliers, even while experiencing severe disruption to cashflows.  The facility will offer financing on terms comparable to those prevailing in markets in the period before the Covid-19 economic shock, and will be open to firms that can demonstrate they were in sound financial health prior to the shock. The facility will look through temporary impacts on firms’ balance sheets and cash flows by basing eligibility on firms’ credit ratings prior to the Covid-19 shock."

So the scheme will support companies which are fundamentally strong, but have been affected by a short-term funding squeeze, enabling them to continue financing their short-term liabilities. It is also designed to support corporate finance markets overall and ease the supply of credit to all firms.

The scheme is open to larger firms whether or not they have previously sought credit in this way. It will operate for at least 12 months. The Bank of England has set out overall guidance about eligibility and notes that the scheme is “normally” intended for:

UK incorporated companies, including those with foreign-incorporated parents and with a genuine business in the UK; companies with significant employment in the UK; firms with their headquarters in the UK. It will also consider whether the company generates significant revenues in the UK, serves a large number of customers in the UK or has a number of operating sites in the UK.  Thus, companies – and their finance subsidiaries – that make a material contribution to the UK economy are eligible to participate.

UK Finance provides further coordination of the scheme and lists main contacts.

Use of measure

The scheme is open to larger firms whether or not they have previously sought credit in this way. It will operate for at least 12 months. The Bank of England has set out overall guidance about eligibility and notes that the scheme is “normally” intended for:

UK incorporated companies, including those with foreign-incorporated parents and with a genuine business in the UK; companies with significant employment in the UK; firms with their headquarters in the UK. It will also consider whether the company generates significant revenues in the UK, serves a large number of customers in the UK or has a number of operating sites in the UK.  Thus, companies – and their finance subsidiaries – that make a material contribution to the UK economy are eligible to participate.

HM Treasury has published data on the number of applications, the number of successful applications and the total value of all loans granted under the scheme. The data series begins on the 10 May and the most recent reporting is from the 28 June.

On the 10 May, there had been 450 applications, with 59 approved. The total value of these approved facilities was GBP 0.36 billion. By the 31 May, the number of applications had increased to 579, with 191 of these being successful. The total value of facilities approved by this date was GBP 1.1 billion.  By the 28 June, 745 applications had been received; 359 had been successful in total and the cumulative total of all facilities approved under the scheme was GBP 2.33 billion.

It should be noted that the applications figure includes:

1. approved applications
2. applications that are still to be processed
3. applications that have been declined or turn out not to be eligible
4. withdrawn applications, where borrowers decide not to proceed.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Larger corporations	Does not apply to citizens

Actors and funding

Actors	Funding
National government	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Unknown	Unknown
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• Unknown
• Main level of involvement: Unknown

Involvement

It is not known whether there was any involvement of the social partners. Any such involvement would have been conducted informally rather than formalised institutionalised fora.

Please note that the UK does not have formal institutional settings for involvement in the design, implementation and monitoring of policies although often, there will be information exchange and consultation, conducted on informal bases (this exists in addition to formal responses from the social partners to official consultations).

It is reported that the Chancellor held discussions with both the CBI and the TUC before launching the raft of emergency measures at the start of the epidemic. Therefore, there will have been discussion but there is no further detailed information available on these.

Views and reactions

No data; it is highly likely that there was discussion/consultation with the CBI and other business groups, particularly as this measure relates specifically to business financing.

Sources

• 17 March 2020: Bank of England, “HM Treasury and the Bank of England launch a Covid Corporate Financing Facility (CCFF)”, 18 March 2020. (www.bankofengland.co.uk)
• 20 March 2020: UK Government Covid-19 Support for Business Guidance (www.gov.uk)
• 20 March 2020: Bank of England, “Covid Corporate Financing Facility (CCFF): information for those seeking to participate in the scheme”, 20 March 2020. (www.bankofengland.co.uk)
• 25 March 2020: Coronavirus Act 2020 (www.legislation.gov.uk)
• 03 April 2020: House of Commons Library Research Briefing 'Coronavirus: support for businesses.' Briefing Paper, Number 8847 , 3 April 2020. (researchbriefings.files.parliament.uk)
• 30 June 2020: HM Treasury coronavirus (COVID-19) business loan scheme statistics (www.gov.uk)