The Insolvency Service has disqualified 459 directors for abusing government support schemes during the pandemic.

The directors have been banned from running companies for up to seven years and four months as part of an effort to punish those who misused taxpayer funds. The Insolvency Service also has pursued criminal proceedings against six directors over the past year for misconduct relating to pandemic loan schemes.

The bounce back loan scheme allowed businesses to borrow up to 25 per cent of annual turnover up to £50,000 and the loans were fully underwritten by the government in the event of default. Banks were allowed to sacrifice normal credit checks to ensure the money could be distributed quickly, but this exposed the scheme to substantial fraud risk.

Taxpayers have been forced to pay out £640 million so far for pandemic loans that had been linked to “suspected fraud”. Starling Bank has flagged the highest proportion of loans that may be fraudulent. It has issued bounce back loans worth at least £695 million of that 35 per cent are in arrears or default.

Dave Magrath, director of investigation and enforcement at the Insolvency Service, said: “These fraudsters are just the latest to find out that we will not hesitate to take firm action where we uncover such abuse, and this can ultimately result in a jail sentence.”