The Insolvency Service (IS) is to take over Covid loan fraud investigations after a review revealed taxpayers’ money was not being effectively recouped.
The National Investigation Service (NATIS) was appointed to investigate and recover the funds, but to date it has only secured 14 convictions despite costing the taxpayer £38.5m.
Business and trade minister Gareth Thomas announced on Thursday (15 May) that NATIS would be scrapped and the IS will take control in a bid to recover money more swiftly.
More than 8,300 bounce back loans issued to the construction sector during the pandemic are suspected to have been fraudulent.
“Today’s decision to transfer cases to the IS will ensure lost funds from Covid-era fraud are recovered more quickly and effectively, so they can be reinvested back into the economy and our public services,” Thomas said in a statement this morning on the Department for Business and Trade (DBT) website.
“The IS will be taking responsibility for NATIS casework, helping to conclude investigations to continue the important work to claw back money for the public.
“It has a proven track record of tackling fraud and misconduct connected to Covid support schemes since 2020 using its powers to investigate trading companies, prosecute criminal offences, disqualify directors and impose bankruptcy restrictions.”
Until the end of March this year, the IS had secured more than 2,000 director disqualifications as well as 62 criminal convictions – recouping more than £6m in compensation related to Covid financial support scheme abuse, the DBT said.
Its announcement is the latest move by the government to reduce waste in the public sector and reform institutions to protect taxpayers’ money.
It instructed the Internal Audit Agency to assess NATIS and, following its conclusion, has scrapped it.
The Covid loans, issued from May 2020 as emergency relief of up to £50,000 for small companies, were backed by 100 per cent government guarantees.
While over £46bn was issued by lenders to support businesses, there have been over 100,000 cases of loss to fraud and error, the DBT said.
“This measure will ensure the continuation of ongoing investigations and expedite the recovery of millions estimated to be lost due to Covid-era fraud,” Thomas said.
Data obtained by Construction News under the Freedom of Information Act from the British Business Bank, which facilitated the scheme, showed that 8,356 bounce back loans to the industry were flagged as suspected frauds by lenders at the end of January.
The figure has increased by 3,564 in the past two years as more potential cases have been identified, and now amounts to just over 3 per cent of all bounce back loans issued to the sector.
For the larger-value Coronavirus Business Interruption Loan Scheme (CBILS), which provided loans of up to £5m, just 29 were flagged as suspected frauds as of January 31, 2025.
In total, there were 260,912 bounce back loans issued to construction companies and 14,688 CBILS loans given to the sector.
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Nicola Harley