Source · Select Committees · Treasury Committee
Recommendation 12
12
We are concerned that there may be a significant lack of capacity and willingness for...
Recommendation
We are concerned that there may be a significant lack of capacity and willingness for the private sector to step in to provide solutions for corporate indebtedness especially amongst small and medium-sized enterprises (SMEs). Viable SMEs struggling with debt will prolong the recession and so the Government must develop solutions for ensuring the recapitalising of their balance sheets. The Government must outline a plan for this within the next three months. It should think creatively (as it has around other support measures) and consider a wide range of potential interventions, such as contingent tax liability or student loan type structures in relation to debt for SMEs, where repayments are conditional on them demonstrating appropriate financial health. TheCityUK has already carried out a comprehensive review on the recapitalisation of businesses, which should provide a starting-point for the Treasury’s work. (Paragraph 101) 56 Economic impact of coronavirus: the challenges of recovery
Government Response
Acknowledged
HM Government
Acknowledged
In relation to your comments on recapitalisation of SMEs, the government has always been clear the private sector should be the first port of call for any business looking to refinance or restructure their debt. The government welcomed TheCityUK’s Recapitalisation Group report on supporting businesses through the economic recovery as a useful contribution to discussions on how businesses can be best supported through this difficult time. Whilst we have considered their proposals, alongside similar suggestions in your report such as contingent tax liabilities and student loan type structures, we remain of the view that accredited lenders, not the government, are best placed to support borrowers repay government-guaranteed loans. The government recognizes the creativity and insight that industry brings to these discussions, so we welcome further ideas and initiatives, led by the private sector, to recapitalise businesses.