Banks left holding an £80bn bag of debt in expedited loans rushed through as part of the COVID support for businesses, are about to find out the true value of the government guarantee backing them, as repayments begin to fall due from often still fragile companies. 

More than a million businesses, according to latest Treasury figures, borrowed their way out of the economic crisis caused by the pandemic, as whole sectors ground to a halt for months, wiping out their income.

With the first loans maturing, the banking sector is flipping the switch on the narrative this was benign borrowing from a benevolent government, and putting companies on notice that they will pursue non-payers. To get the Treasury to make good on its guarantee they must pay, to the full extent of their legal rights.

Market watchers warn of the potential for a PR headache of big banks versus struggling businesses which could snowball into a government fight back over the legitimacy of bank's lending criteria.

UK Finance says lenders are committed to supporting all customers in financial difficulty and will consider forbearance options including repayment holidays and term extensions where appropriate. Financial vulnerability campaigners are sceptical.

With HMRC’s hands full trying to make a dent in its own COVID-support scheme related problem, however, as fraud is estimated at £25bn a year, the government has little incentive to assist or assuage the banking sector as it begins to discover who really pays for the COVID support schemes.

To find out who actually pays, click the link: Government Covid support schemes: who pays?