Letter: ‘Good loans’ scheme can weed out zombie businesses

The FT’s coverage of the British Business Bank’s audit of Future Fund investments (“UK government investment fund largely backed ‘zombie firms'”, Report, August 8) highlights a problem criticism facing small and medium-sized businesses today, and something that lenders and investors are increasingly wary of.

It is unfortunately true that many businesses in the UK are simply looking to access finance to reduce their debt, with no prospects for growth, thus creating zombie-like businesses. This legacy of Covid has been further exacerbated by the deteriorating economic and geopolitical situation. However, we must recognize that supporting all businesses indiscriminately will deplete vital business funding that will drive economic growth in the future.

While it is essential that we continue to support entrepreneurship and business, it is inevitable that private and public credit providers will need to be more selective in the future in assessing which businesses have realistic growth prospects by compared to those destined to fall off a cliff of default. .

A permanent government ‘good loans‘ scheme with tougher lending criteria would go a long way in channeling funds to support these businesses at this critical stage for the UK economy.

Doug Grant
Managing Director, Manx Financial Group
Managing Director, Conister Bank
Douglas, Isle of Man

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