The uk taxpayer faces losses of as much as 23bn so far in bad loans across the state coronavirus emergency bailout schemes, according to government estimates that will raise concerns over the cost of supporting unviable companies through the pandemic.

The warning comes just days after chancellor rishi sunak extended the programme of business support to the end of november to protect companies from collapse this winter.

Figures published on wednesday in the department for business, energy and industrial strategys annual report show that officials estimate that losses could rise to 23bn in the worst-case scenario based on august figures.

Under the best-case scenario, this drops to about 12.9bn, using loss ranges based on similar previous programmes. both estimates combine credit and fraud losses.

It also emerged on wednesday that the british business bank had raised formal concerns about the governments emergency bounce back loan and future fund schemes ahead of their launch in may in letters to ministers only now being published.

The bank, which administers both schemes on behalf of the treasury, requested an unambiguous letter from ministers instructing it to proceed with the programme given the concerns. in a letter to alok sharma, the business secretary, bbb chief executive keith morgan flagged very significant fraud and credit risks.

The treasury has backed loans of 58bn to more than 1.3m businesses through its coronavirus bailout schemes, according to september figures. using these numbers and the government methodology for calculating loan losses, this would increase the bill to more than 26bn in the worst-case scenario.

Most of the loans have been made through the 38bn bounce back programme, which offers only lightly vetted loans of up to 50,000 fully guaranteed by the state.this is also where most of the losses are predicted, with loss ratios of between 35 per cent and 60 per cent, according to beis.

Senior bankers have warned about the high risk of default among bounce back loan applicants who would not normally be approved, as well as fraud by criminal gangs able to exploit the limited checks that are required to borrow money.

The business department said: our support has been targeted to ensure we help those who need it most as quickly as possible and we wont apologise for this. weve looked to minimise fraud with lenders implementing a range of protections including anti-money laundering and customer checks, as well as transaction monitoring controls.

The loss to the taxpayer of covering companies unable to pay back loans also highlights the possibility that large numbers of businesses will fail even after taking on state-backed debt or even, some bankers fear, because of the new debts that will sit on their balance sheets for up to 10 years.

Some of the cost will fall on banks, which were encouraged to lend to struggling businesses despite misgivings over the high risk that the money would never be returned.

Two other schemes the coronavirus business interruption loan scheme (cbils) and the coronavirus large business interruption loan scheme (clbils) are only 80 per cent guaranteed by the state.

Banks also face the cost and reputational risk of trying to recover bad loans before the government steps in with the guarantee, with talks within the industry about creating a separate body that could oversee this work.

Using a so-called formal reservation notice the mechanism through which it can flag concerns on particular grounds the bbb in may flagged the extensive reliance on customer self-certification in the bounceback scheme, and corresponding fraud risk.

Mr morgan warned in his letter to mr sharma that the scheme was vulnerable to abuse by individuals and by participants in organised crime.

He added that, alongside the fraud risk, there will be considerable credit risk in the current economic environment, which will be exacerbated by removing significant elements of the credit checks that would otherwise have been undertaken.

A separate letter questioned whether the treasurys future fund scheme, which gives convertible loans to start-ups, would offer value for money.

Its central scenario for the scheme showed a negative benefit cost ratio, with the better companies less likely to use the scheme as they would already have found investors.

This will result in [the government] investment going to the second tier of companies, which will likely result in higher associated loss rates, said mr morgan.