Does inflation trigger early repayment on Covid-19 UK guaranteed loans?
Marc Cowling and
Nicholas Wilson
Applied Economics Letters, 2024, vol. 31, issue 17, 1651-1655
Abstract:
The UK government underwrote more than 1.68 million business loans totalling £78.4bn during the COVID-19 pandemic. Given that the Bounce Back Loan (BBL) had a 100% guarantee and the Coronavirus Business Interruption Loan Scheme (CBILS) 80%, the public sector contingent liability is very large. In this article, we explore whether or not the recent and dramatic rises in UK inflation have prompted firms with COVID-19 BBL and CBILS guaranteed loans to repay their outstanding debt early (in advance of the full 6-year loan term as specified in the original loan agreement). Our results show that this was indeed the case with increasing inflation exerting a strong and positive effect on early loan repayment on both guarantee schemes. This is consistent with the firm’s debt aversion and a desire to reduce existing debts in anticipation of a future economic recession, liquidity problems and high interest rates.
Date: 2024
References: Add references at CitEc
Citations:
Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2023.2205091 (text/html)
Access to full text is restricted to subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:31:y:2024:i:17:p:1651-1655
Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20
DOI: 10.1080/13504851.2023.2205091
Access Statistics for this article
Applied Economics Letters is currently edited by Anita Phillips
More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().