A statement from the Department for Business, Energy, and Industrial Strategy reads, “It is unfortunate that some have taken the decision to take advantage of this vital intervention by defrauding the scheme for their own financial gain. The government has always been clear that anyone who sought to do so is at risk of prosecution.”

Digital banks are among those suspected of providing these fraudulent loans, Metro bank was flagged for £7.24 million of suspected fraudulent loans and Starling for £91.97.

When approached for comment, Starling responded: “Throughout the term of the BBL Scheme and subsequently, Starling took a strong and proactive stance to protect taxpayers’ money, as well as to support our customers and help them repay their loans. We are supporting customers through the Pay as You Grow scheme and going down a strong recoveries path.

"A large proportion of Starling’s BBLS customers were relatively ‘young’ businesses, which have a higher probability of failing than more established businesses. Many of the big banks lent only, or primarily, to their existing customers with whom they may have had a long-standing relationship. They took on no, or very few, new business customers, unlike Starling, which remained open for new business throughout. We have excellent processes for detecting fraud and where we suspected fraud we defaulted the loans and commenced our recovery process swiftly."

The news comes after Jacob Rees-Mogg publicly questioned Starling Bank over BBL recovery. The bank’s founder Anne Boden also threatened legal action following similar criticism received from Lord Agnew earlier in the year.

The UK’s traditional banks carried a substantially higher proportion of suspected fraud across their BBL loans, with Lloyds seeing £304.80 million and Barclays £259.41 million. It is worth noting that Lloyds and Barclays had two of the largest bounce back loans, at £8.5 billion and £10.7 billion respectively.

The government report also highlighted the proportion of these loans which have defaulted. £3.2 billion remains in outstanding balance of loans in arrears that have not yet progressed to default, there is £1.4 billion in outstanding balance of loans which have defaulted but have not progressed to be claimed, and £2.6 billion remains outstanding for the balance of loans claimed that haven’t yet progressed to being settled.

The BBLS was first launched in May 2020, and was the largest of the three government related business loan schemes. Loans of up to £50,000 were provided with payback schedules of six or 10 years.