A quarter of a million firms have taken on so much debt to survive the coronavirus crisis that they could be crushed by the weight of loans in the coming months, putting up to three million jobs at risk unless radical action is taken, financiers have warned.
The roles under threat are equivalent to wiping out more than all the jobs in the West Midlands.
In a 144-page report sent to the Treasury and the Bank of England on Thursday, financiers including outgoing Lloyds chairman Lord Blackwell and Legal and General chairman Sir John Kingman said that debt-laden firms should be able to convert their coronavirus loans into new products so that they can pay the debt back without being forced into bankruptcy.
They want a "Recovery Corporation" to turn toxic debts into tax obligations, and take private sector investment to gradually reduce the Government's exposure.
"Failure to act decisively now will condemn many SMEs and communities across the nation to default and decline," said Sir Adrian Montague, Aviva's former chairman who led the report on behalf of lobby group TheCityUK.
High-street banks have doled out billions in emergency loans to prop up small companies during the crisis, supported by a taxpayer guarantee to cover their losses if a borrower defaults.
However, the current rules require banks to vigorously pursue the debt before turning to Whitehall for what they are owed.
Three-quarters of unsustainable debts facing small businesses from Covid-19 loans, equal to £25bn, are from outside London, threatening the Government’s "levelling up" agenda.
Omar Ali at EY said the objective of the Recovery Corporation was "categorically about finding ways to help businesses recover" and not about making life easier for Britain's banks.
"You can't ignore what the facts are showing, which is that a large number of businesses won't be able to pay the taxman or the government scheme back," Mr Ali said.
Even before this debt hits, the jobs crisis is hitting hardest in the north of England, according to analysis by the Centre for Cities.
It found that there are 50pc more applicants per job in the Midlands and North than there are in London and the South East.
There are three CVs posted on jobs website Indeed for every one job vacancy in Middlesbrough, and 2.2 in Sunderland. By contrast in Cambridge there are only 0.3 CVs per vacancy, with 0.4 in Oxford and 0.6 in Reading.
The impact also varies by industry. Almost one million jobs have already been lost in tourism and hospitality, with more than 500,000 more at risk, according to a study by Aston University.
A membership survey by the British Chambers of Commerce found almost 40pc of consumer-facing businesses are set to cut workers, as well as 31pc of construction companies.
Thursday's official jobs numbers are expected to show a modest rise in unemployment, staying close to the multi-decade low of below 4pc recorded at the start of the year.
However, economists at the Resolution Foundation warned the "true" figure could be far higher, as the official number does not include people who have lost their jobs but are classed as "inactive" because they have given up looking for work during the crisis. It is also suppressed by the furlough scheme that is paying millions of workers to stay at home. The claimant count figures are also a poor guide to joblessness.
It found that just 55pc of adults were working during the lockdown, down from the usual rate of 70pc.
This loosely matches the fall in economic activity of about 25pc, underlining the risk that unemployment will shoot up unless the economy rebounds significantly before the furlough scheme comes to an end in October.
Even those who remain in work will find their jobs changed by the crisis, according to the Chartered Institute of Personnel and Development.
It expects the number of people who regularly work from home to more than double to almost four in 10, as more than a quarter of employers believe it has been good for productivity.
Those who quit employment altogether and start working for themselves may have the best balance, a study from the Institute for Fiscal Studies indicates.
Earnings typically fall by 30pc, or £500 per month, when workers choose to go it alone, but their overall wellbeing and life satisfaction rises.