LONDON: In the northern English seaside resort of Blackpool, the family-run Elgin Hotel is preparing to reopen in August after four months' enforced closure. The Elgin had a profitable 2019, but bookings so far suggest that the 89-room hotel yards from the seafront will be less than half full this summer, as coronavirus concerns deter older holidaymakers and social distancing reduces capacity.

To help cover lost revenue, the hotel tried to secure an 800,000 pound ($1.02 million) loan under the UK's taxpayer-backed Coronavirus Business Interruption Loan Scheme (CBILS). Owner Nigel Seddon said he had applied to five different banks offering loans under the government scheme but he's still waiting to secure the cash he needs, after some lenders said they could not take on new customers or quoted costly terms he would struggle to afford.

Seddon fears that if businesses like his cannot tap sufficient support then deprived towns like Blackpool could fall further behind London and the comparatively wealthy South East of England. "People feel that all the money is being spent down in London," he said. Blackpool has struggled since its pre-war heyday when families flocked to see its glittering night-time "Illuminations" lightshow and relax on its long, sandy beach.

Several deprived areas of England - some of which voted for Brexit and switched from supporting the Labour Party to Prime Minister Boris Johnson's Conservatives in last December's national election - are now being disproportionately hit economically by the coronavirus. Johnson has promised to "level up" regional towns and cities. Yet a report published this month by The CityUK, a lobby group, forecast 30 percent of total lending by UK banks by next March would be in the capital, followed by 15 percent in the South East, and 10 percent in the East of England, with all other regions below 10 percent. Industry groups say Seddon's experience is common in some of Britain's less well-off regions.

Under CBILS launched in March and its sister initiative, the Bounce-Back Loan Scheme (BBLS), which followed in May, 45 billion pounds of loans have been granted to more than 1 million small and micro companies to help them survive the pandemic. But unlike in the United States, where the destination of around three quarters of the $521 billion lent under its Paycheck Protection Program has been disclosed, neither the UK government nor finance industry has divulged exactly where the money has been lent.

"We're kind of flying blind at the moment … we are concerned about regions potentially falling down," said Chris Wilford, the Confederation of British Industry's head of financial services policy, pointing to some regions' heavy dependence on ailing sectors like hospitality and manufacturing. "If one big business reduces its footprint or goes under in some of these towns, then that's devastating," he said.

Lack of transparency
The UK Treasury, which collates data on relief lending, declined a Freedom of Information request from Reuters for a regional breakdown on lending under the CBIL and BBL schemes. It said it recognized a need for transparency regarding use of public funds but the regional data was supplied by the banks "in confidence" and disclosure of information "likely to prejudice the commercial interests of lenders would not be in the public interest."

Trade body UK Finance also declined to provide the breakdown. UK Finance said it is working on supplying regional lending data for its membership in the next few weeks. Only one major lender, NatWest Group, shared a regional picture of relief lending, defining regions broadly. NatWest's data as of early June showed 27 percent of loans in the North, 24 percent in the Midlands & Eastern region and 22 percent in London & South East. The South West & Wales region and Scotland secured 18 percent and 8 percent respectively.

HSBC, Lloyds Banking Group and Barclays said regional data was either unavailable or problematic as each lender defined each region differently. The CBI's Wilford said the group had begun its own research into how the regions were faring through the COVID crisis, which would likely examine potential regional or sectoral disparities in lending and wider cash flow issues.

Business groups from the North East, South West and North West told Reuters they felt banks were running shy of lending in their areas, where economists predict far deeper economic slumps as a result of the pandemic. Forecasts published by Oxford Economics show economic output is expected to fall furthest in the West Midlands, Yorkshire and the Humber, the North East, and Wales in a range of -6.6 percent and -5.7 percent in 2020 compared with 2019 projections.

London's output is seen falling by 4.1 percent. Even before the crisis, lending to small businesses in the North West, where the Elgin Hotel is based, fell 11 percent over the three years to December, compared to a 3 percent fall in London, according to the latest available data from UK Finance.

Economic growth in the region was also outstripped by London by three to one, at 10 percent to 3 percent, over the three years to September, latest Office for National Statistics' data shows. Britain has struggled for decades to find ways of fuelling regional growth outside London. The government already spends more than it generates in taxes in every part of Britain apart from London, the South East and the East, according to a Reuters analysis of public spending data.

Can't borrow, wont borrow
Naresh Aggarwal, associate director, policy & technical at the Association of British Treasurers, said any regional lending bias was unlikely to be deliberate but a consequence of banks' reluctance to lend to certain businesses, perhaps due to excessive exposure, which could in turn have a geographic bias.

Others cited poorer banking relationships and a lack of trust felt by borrowers towards banks, particularly since lenders had slashed regional branch networks as part of cost cutting measures since the 2008/09 financial crisis. "It still feels like there's an institutional bias against places like Cornwall when it comes to CBILS," said Kim Conchie, chief executive of the chamber of commerce in Cornwall, one of the poorest counties in England.

Flagging the battle faced by many businesses to secure relief loans above 50,000 pounds, many cash-strapped firms had opted to apply for more modest BBL support instead, he said. BBL losses are covered 100 percent by the taxpayer and applications involve fewer affordability checks than CBILS loans, where banks remain 20 percent exposed to defaults.

But some of these borrowers would likely need fresh aid soon, as other government relief measures such as the Job Retention Scheme - known as 'furlough' - taper off and deferred rents and other taxes fall due this autumn. A survey by the North East Chamber of Commerce (NECC) found 65 percent of its members had accessed the government's furlough scheme, yet more than two thirds had not sought a state-backed loan.

"For the banks, it feels like they want businesses - many of whom are in a short-term crisis - to prove their ability to survive over the next five years before they will help," said Jonathan Walker, the NECC's assistant director of Policy. "That is of course impossible." - Reuters