Shady Companies Receive Billions in UK Bailout Funds

Published: 20 August 2020

Rishi SunakRishi Sunak, who has served as Chancellor of the Exchequer since February of this year. (Photo: Chris McAndrew, Wikimedia, License)

By Eli Moskowitz

In an effort to take the United Kingdom out of one of the deepest recessions of any major economy following the pandemic, the country’s government has injected billions in public funds into corporations embroiled in financial and human rights scandals, Vice reported on Tuesday.

According to the outlet’s investigation, 18.9 billion pounds (US$25 billion) were given to companies that have engaged in fraud, corruption, environmental destruction, chemical weapons manufacturing and selling weapons to governments accused of human rights violations.  

The funds were distributed by the Bank of England through a program called the Covid Corporate Financing Facility (CCFF), which provides low interest loans backed by U.K. taxpayers to some of the largest companies operating in the country. 

“I want to ensure that no viable business slips through our safety net of support as we help protect jobs and the economy,” said U.K. finance minister Rishi Sunak in April after announcing the government’s decision to allocate 330 billion pounds ($437 billion) in CCFF funding for large firms that qualify. 

Vice revealed that some of the companies to have taken advantage of this program include American oil giant Schlumberger, which received 415 million pounds ($548.46 million) despite being registered in the tax haven of Curacao. 

In 2015, the company was fined $232.7 million for violating sanctions against Iran and Sudan, which was at the time the largest fine of this kind ever issued. 

Months after receiving the U.K. loan, the company announced in July that it would be cutting 21,000 jobs worldwide, just one day after it paid out over $100 million in dividends. 

This reflects a larger reported trend revealed in a previous investigation by Vice earlier this month, which uncovered that companies accepting CCFF loans have paid out a total of 11.5 billion pounds ($15.2 billion) in dividends, while cutting 42,000 jobs.  

Experts argue that the stimulus package should be administered more judiciously, and with stronger conditions attached to ensure the government gets stronger returns on the financial assistance it is providing to large companies.

“If these bailouts are given out, they should be done with some sort of equity stake so that states are not expropriated several times over,” Atul Shah, a professor of Accounting and Finance at the City University of London told OCCRP. 

“This is a chance to really negotiate hard with them,” he explained, suggesting that giving preferential rates on loans without sufficient requirements “is subsidizing the bad behavior of corporate actors.” 

According to a CNN article last week, the U.K. has lost roughly 730,000 jobs since the beginning of the coronavirus pandemic, with the younger, older and the self-employed portion of the population being hit most severely. 

"Today's figures confirm that hard times are here," Rishi Sunak said in a statement. "Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will. But while there are difficult choices to be made ahead, we will get through this, and I can assure people that nobody will be left without hope or opportunity."

The U.K. appears to be more indiscriminate in its use of corporate bailout funds than other governments. 

Several countries, such as Denmark, have stated that they would not provide financial assistance to companies registered in tax havens, or to companies paying dividends or issuing stock buybacks. 

Meanwhile, the EU has itself recommended that member states make similar qualifications for public corporate bailouts. 

Shah explained that the U.K.’s decision to leave the European Union reflects its failure to impose similar conditions to bailouts.

“Britain wants to go out of its way to attract dirty money,” he said, suggesting that similarly to its recent corporate bailouts, the UK’s pro-Brexit parties have been behind a concerted effort to attract business from corporations seeking lower tax burdens and financial regulation. 

According to the investigative think tank Tax Watch, the U.K. doled out 325 million pounds ($429 million) to the two largest cruise lines, even after a fierce debate in the U.S. appeared to have disqualified the industry from receiving federal funds from the U.S. CARES Act. 

British Prime Minister Boris Johnson recently called the cruise industry “a great, great British industry,” stating that the U.K. “will support it in any way that we can.”

The loans to the two cruise liners were received by Royal Caribbean Cruises – which, despite having headquarters in the U.K., has been incorporated in Liberia since 1985 – and Carnival Corporation, which is incorporated in Panama.