UK offers 100% state-backed COVID loans to smallest firmsUK offers 100% state-backed COVID loans to smallest firms
Downing Street COVID-19 news conference in London

LONDON (Reuters) – British finance minister Rishi Sunak on Monday bowed to pressure to do more to help companies survive the coronavirus shutdown and announced 100% state guarantees on loans to Britain’s smallest businesses.

Sunak, who previously opposed 100% government backing for emergency credit for small firms, said the government would fully back loans of up to 50,000 pounds ($62,000) to micro companies which would pay no interest for the first 12 months.

“I know that some small businesses are still struggling to access credit. They are, in many ways the most exposed businesses to the impact of the coronavirus,” Sunak told parliament.

“If we want to benefit from their dynamism and entrepreneurial spirit as we recover our economy, they will need extra support to get through this crisis.”

Britain last month announced an emergency 330 billion-pound credit scheme including loans of up to 5 million pounds for small and medium-sized companies, with state guarantees of 80%.

But that programme got off to a slow start with many companies saying they were struggling to get banks to approve their loans.

Sunak said on Monday that banks had now provided 3.4 billion pounds in loans via its Coronavirus Business Interruption Loan Scheme. The Bank of England had separately issued more than 14 billion pounds to bigger firms.

Bank of England Governor Andrew Bailey previously suggested that 100% state guarantees for the smallest loans might break a backlog in applications.

Sunak also said a government scheme paying 80% of the pay of workers temporarily laid off by companies was now covering 4 million jobs.

($1 = 0.8063 pounds)

(Reporting by David Milliken; Writing by William Schomberg; Editing by Estelle Shirbon)