UK firms taking taxpayer-backed Covid loans continued donations to Tory party

Exclusive: Guardian investigation shows companies donated tens of thousands of pounds while receiving low-interest loans

Companies that received taxpayer-backed loans to help them survive the pandemic continued to donate tens of thousands of pounds to the Conservative party, the Guardian can disclose.

While there is no evidence the low-interest loans were used to fund donations directly, critics say there was no justification for companies requesting taxpayer help during the pandemic and then continuing to make political contributions.

One campaign group said it “smells like state funding of a political party” and called on businesses that made donations to compensate the Treasury.

The chancellor, Rishi Sunak, launched the coronavirus business interruption loan scheme (CBILS) in March 2020, offering emergency loans of up to £5m to small businesses hit by Covid-19. Loans have been made to more than 100,000 firms.

While the loans are arranged and made by banks, the government guarantees them and also pays the first year’s interest and loan fees. These elements of the £27bn CBILS scheme constitute state aid, according to the government and the European Commission.

Analysis by the Guardian of the state aid disclosures published by the commission shows that several firms that were already Conservative donors continued contributing to the party after receiving taxpayer-backed loans.

Dow Investments, a property firm founded by the Scottish entrepreneur and philanthropist Robert Kilgour, received a CBILS loan of £1m in August 2020, of which the state aid element amounted to £106,798. After receiving the loan, the company continued making monthly payments to the Conservatives, with a combined value of £37,494.

Kilgour sits on the advisory council of the TaxPayers’ Alliance, an influential rightwing thinktank that rose to prominence campaigning for cuts in public sector spending. Approached for comment, he said the loan was “fully secured against its property assets as an extra financial reserve against the slings and arrows of the very severe business effects of the pandemic”.

Calling it a “very prudent move”, he added: “Dow Investments currently plans to repay the full CBILS loan in early 2022.”

Kilgour said Dow’s subsidiary Renaissance Care, a nursing home business, was a private company providing a predominantly public service, because 67% of its elderly residents were local authority clients.

The Department for Business, Energy and Industrial Strategy (BEIS) also guaranteed a loan of £1.5m to the aerospace parts business Orange Aero, of which £162,425 was classified as state aid. After receiving the loan in August 2020, Orange Aero donated £50,000 to the Conservative party in October of the same year.

Orange Aero’s managing director, Simon Jeffs, said there was no link between the loans it received and the company’s subsequent political donation. “Our business has been decimated and we have had to be extremely agile and reinvent ourselves to focus on other areas of the aerospace business,” he said. “The CBILS loan was outstanding support but we also had an outstanding year in 2018 and retained in the business the profits we made.”

He said the loans were made by banks and would be fully repaid, adding that the company’s political donations were “modest”.

The Norwich-based construction company Bateman Groundworks took a loan of £1.8m in August 2020, including a state aid portion worth £186,120. That same month it donated £4,500 to the local MP Brandon Lewis, followed by donations of £6,000 and £12,000.

Its managing director, Richard Bateman, said the loan was “fully guaranteed and secured against both company and personal assets” and said this meant it was “not a taxpayer-backed loan”. “The loan was in no way used to fund the Conservative party generally or any individual member of the party,” he said.

Another company that received a CBILS loan was Stonehaven Campaigns, a public relations and consultancy business set up by the former Scottish Conservatives rising star Peter Lyburn. The company received a £500,000 loan in April 2020, with the state aid component reaching £47,100. It has donated £1,250 to the Conservative party every month since then, to a value of £15,000.

Stonehaven Campaigns declined to comment on the record, but the company made clear any loans it received did not fund outgoings on donations.

Tom Brake, the director of the pressure group Unlock Democracy, said: “There can be no justification for a business, in receipt of financial support during the Covid pandemic, to continue donating to party funds.

“To suggest that somehow donations are completely separate from a company’s overall income is disingenuous. This looks and smells like state funding of a political party – something you’d expect the government to oppose ideologically. The government should be requesting that these businesses repay an equivalent amount to the Treasury.”

A government spokesperson said the loans “provided a lifeline to millions of businesses across the UK – helping them survive the pandemic and protecting millions of jobs. We have always been clear that these are loans, not grants. In every case, lending decisions were made by lenders in a process that is completely separate from government and there are strict guidelines which set out how the funds from these loans should be used.”

While the decision to lend under the scheme rests with banks, the government guarantees the loan, with 8% of its value deemed to be state aid. The taxpayer also picks up the cost of interest and loan fees for the first year.

Asked if taxpayer money had been indirectly used to fund the Conservative party, the party did not return requests for comment.

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