Is Sunak's debt mountain poised to erupt?
- Credit: Archant/Getty  The rumbling of imminent repayments is keeping some bosses up at night. asks Eleanor Pringle  The government has bled cash for months on end in an attempt to quell the economic chaos caused by the pandemic. From furlough to grants, bounce back loans to income support, the chancellors office had to dig deeper and deeper into its pockets in order to save businesses great and small. But the purse strings are once again tightening with the end of such schemes  and bounce back loans are beginning to be called in. Chancellor Rishi Sunak delivers his one-year Spending Review in the House of Commons. - Credit: PA  Chancellor Rishi Sunak may have cause to be nervous, however, with a recent report suggesting that up to 60pc of the 46.5bn loaned out might never be repaid. You may also want to watch:  A recent report from insolvency practitioners Business Rescue Expert said that at worst 27.9bn may never be returned  with the government acting as the 100pc guarantor of the funds. Andrew Kelsall is a partner in insolvency and recovery for Larking Gowen, working across the firms Ipswich and Norwich offices. He said: Ive seen varying predictions on the default rate when it comes to bounce back loans  some people are saying anywhere up to half of loans will be defaulted on. At the moment Id say its impossible to predict until we get into it and we see the liquidations really starting to come through. Theres also no telling how much each company could potentially owe. We know the limit is up to 50,000 but thats dependent on turnover. The minimum is 2,000 but I would hedge a bet that for that amount businesses might not have bothered. In my opinion businesses are likely to owe tens of thousands of pounds instead of just a few, on average. Weve got businesses were speaking to at the moment which we know are likely to go into liquidation and there will be more to come. I think well start to see the numbers coming up towards the autumn and start of winter when furlough runs out and the loan repayments properly kick in.  But with any offer of a helping hand there will always be those who took advantage, with the government now introducing retrospective legislation to understand whether loans  have been used properly by directors. The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill  currently at its second reading in the House of Commons will allow for the disqualifications of directors of companies who dissolved companies which dissolved without becoming insolvent. Mr Kelsall explained: What were potentially seeing is people opening companies, applying for a bounce back loan, and then dissolving the company before they could file any accounts. That makes it very difficult to trace where the money went and what it was spent on. Itll be particularly interesting to see which companies paid dividends and whether they paid them out while accepting loans. Shoppers out in force wearing masks in Norwich city centre on the first day it became mandatory for shoppers to wear face coverings in shops. Picture: DENISE BRADLEY - Credit: Copyright: Archant 2020  What happened with the bounce back loans is that the government needed to react quickly to the crisis we were in  and there was no way of making this vital funding accessible without there being potential loopholes for people who would look to abuse it. Whats happening now with this legislation is that insolvency practitioners will be asked to investigate people who dissolved their companies and potentially recuperate some of the funds.  But Westminster has been warned not to crack down on legislation and support too harshly in an attempt to grapple themselves back into the black. Ayobami Illori is a Norwich-based professor of macroeconomics at the Open University, and said that the government risks shooting itself in the foot if it calls in its debts too soon. He said: Just look at the Delta variant. We didnt even know about it a couple of months ago and now its delaying our economic reopening. We cant be saying to businesses: The economy isnt reopen and back on its feet yet, but also, were not going to support the private sector anymore. Government risks undoing all of the hard work it did with the funds during the pandemic if it suddenly starts withdrawing all its cash when the economy is still coming out of this  and when theres still a level of uncertainty.  There have now been more than 50,000 deaths in the UK linked to coronavirus. Picture: Denise Bradley - Credit: Copyright: Archant 2020  Andrew Mower, East Anglias development manager for the Federation for Small Businesses, suggested an alternative to recouping the cash: When the bounce back loan scheme launched it was widely expected that wed have the pandemic under control by Christmas. That wasnt the case, so theres understandably going to be a lot of small firms struggling to make the bounce back loan repayments that are now kicking in. The government could leave it to the banks to enforce collection, but that would risk the destruction of many businesses who would otherwise be viable and increased unemployment as the furlough scheme winds down. An alternative would be to give those who are cash-strapped the option to swap debt for employee equity. This would protect livelihoods, spur productivity and pave the way for a small business-led recovery as we seek to emerge from the deepest recession in modern history. It would also overcome the likely objection to unconditional forgiveness of bounce back loans, as business owners would not be the only beneficiaries of a loan write-off.