Less than 15 per cent of emergency Covid loans issued to small construction companies have been paid back in the six years since the start of the pandemic, Construction News can reveal.
Data obtained from the British Business Bank under the Freedom of Information Act shows that 38,740 out of the 260,912 bounce-back loans issued to the sector had been settled by the end of January 2026, amounting to 14.8 per cent.
As social restrictions were put in place in March 2020 to stop the spread of the coronavirus, many construction sites closed; bounce-back loans were subsequently established to enable small businesses to access up to £50,000 in finance.
These loans were backed by a 100 per cent government guarantee for lending institutions.
The figure for the loans paid back by early 2026 is only slightly up from the total of 30,282, or 12 per cent, a year earlier.
At the end of January this year, 83,900 bounce-back loans to construction companies – 32 per cent of the total – had been defaulted on, while 11,119 were in arrears but not yet defaulted.
The defaulters’ total was up by more than 8,000 since early 2025, while those in arrears fell by just over 1,000.
Larger companies, with a turnover of up to £45m, were able to borrow as much as £5m under the Coronavirus Business Interruption Loan Scheme (CBILS).
Some 14,688 loans were taken out under the scheme, with a combined value of £4bn. Eighty per cent of the total would be covered by the taxpayer in the event of a default, although terms for the borrower were similar to those of a standard commercial loan, with businesses expected to provide their own guarantees.
CN’s data shows 7,093 companies – 48 per cent of the total – had paid back their loans by the end of January 2026. This was up from 37 per cent a year earlier.
Some 1,860 had defaulted on them, while 131 were in arrears short of a default.
The debts taken out during the crisis are still burdening thousands of companies with extra overheads, six years later.
Quantuma Advisory managing director Brian Burke told CN: “While the loans themselves helped support businesses to navigate through the pandemic, their ability to repay them afterwards and the subsequent defaults reflect the significant challenges they have faced. The sector contracted as client confidence suffered – projects have been delayed, profit margins have been squeezed.
“A shortage of skilled labour, wage inflation, increased material costs and resulting cashflow pressures have all contributed, along with the additional debt burden, resulting in increased levels of financial distress and insolvencies.”
Julie Palmer, managing partner at financial and real estate advisory group BTG, formerly called Begbies Traynor, said these debts were showing up in much of her work with failing businesses.
“Bounce-back loans are a prevalent feature in many of the insolvency appointments we have been involved with across all industries, so it is no wonder there is still a persistent issue with this type of debt among construction companies,” she said.
She echoed the comments about rising costs from elsewhere and said they had also “contributed towards persistent financial distress for the sector”.
Palmer added that directors and owners of debt-laden firms would be “fatigued by years of challenges” and difficult market conditions.
“As we have already seen in construction, this could further widen the gap between larger companies with the resources to maintain resilience through the challenges in the market and the smaller independent firms and subcontractors who may be left with no choice but to fold.”
Cladding specialist M Price Group went under in August 2024, owing £750,000 from a CBILS loan to NatWest. It called in administrators from Begbies Traynor.
In the administrators’ latest progress update, published in August 2025, they said the outstanding liability in respect of the loan was £250,000, and it was expected to recoup the rest of the cash after the sale of property by another M Price Group company’s administrators.
The data CN obtained from the British Business Bank also shows that 8,374 bounce-back loans and 29 CBILS loans are now suspected to have been fraudulently obtained – similar figures to the totals revealed a year ago.
In February, Adebanjo Adebayo Talabi, 42, former director of London-based Bebo Construction, was given a suspended prison sentence and banned from being a company director for six years after pleading guilty to three counts of fraud related to bounce-back loans.
Between August and November 2020, he applied for three loans from three separate banks totalling £150,000, when the company was only entitled to one. He also exaggerated the company’s turnover and transferred the money to his personal accounts rather than using it for the business, according to the Insolvency Service.
Last autumn, the government launched a voluntary repayment scheme for those who had committed Covid loan fraud, giving them until December to repay the money with “no questions asked”, or risk prosecution under enhanced powers.
More than £10.9bn was lost to fraud and error related to Covid-19 spending, according to the former Covid Counter Fraud Commissioner, only £1.79bn of which had been recouped by the end of 2025.
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Ian Weinfass