Counterparty risk has been increasing across the freight and shipping sectors since the start of coronavirus lockdowns. Worryingly then, the failure of UK government loan schemes to protect logistics companies could see the risk of bankruptcies peak in June just as economic activity picks up, according to the Freight Transport Association (FTA).

It claims the government’s Coronavirus Business Interruption Loan Scheme (CBILS) is failing to protect logistics businesses from financial calamity because those implementing the scheme are moving too slowly.

“Lenders continue to stall on making decisions on applications for the loans which are intended to keep our sector afloat, yet government has so far failed to deliver on its promise to push decision making along,” said David Wells, Chief Executive of FTA.

“In the meantime, logistics businesses are now starting to face emerging holes in their cash flows caused by a lack of billable work from April, when the crisis really took hold.”

Wells said the work that disappeared in April would be due for payment from mid-May onwards. “That’s when the real cashflow crunch will hit,” he added. “Without successful loan payments from CBILS to bridge the gap between lockdown and the restart of activity, many logistics businesses will simply stop trading.”

An FTA survey found that that almost a fifth of members were in danger of financial collapse within eight weeks, but only 5% had been successful with their CBILS applications.

The survey also revealed that over a third of logistics SMEs were stuck in “banking purgatory”, either not eligible, unsuccessful, still awaiting a decision, or in need of more information.

“The government needs to step in now and free up the application process for CBILS to ensure the future stability of the industry that powers all of the UK’s economy,” said Wells.

Source: lloydsloadinglist