The number of small and medium-sized businesses (SMEs) in the UK expected to default on repayments of state-backed COVID-19 emergency loans has turned out to be lower than initially feared at around £5bn.

According to an FT report citing officials and bankers, an assessment of the first few months of servicing the loans showed that so far around 5-10% of SMEs that dipped into the government’s £47.4bn support scheme have missed repayments, with many pointing to the stronger than expected rebound in the UK economy following the relaxation of lockdown restrictions.

However, despite the more favourable picture some analysts have highlighted that the data still doesn’t remove the fact that debts has ballooned as a result of COVID-19.

Douglas Grant, Director of Conister comments: “Today’s data sheds some light on the scale of SME debt defaults in the UK and despite a lower predicted number than first thought, we must acknowledge that our business debt burden has ballooned to unprecedented levels and unfortunately this has already created a relentless flow of weak zombie-like companies falling off a loan default cliff. It is imperative that we support sectors and businesses that are strong and nimble enough to adapt to the new economy and therefore continue contributing to its growth”.