TWO million jobs and almost three-quarters of a million small businesses are under threat under the government’s Covid-19 loans scheme, Labour warned yesterday.

The government is demanding repayment of £75 billion in loans made to help companies survive the pandemic lockdown — even if firms are struggling to get back to profitability.

Labour is calling for urgent changes to the repayment scheme, linking it to profitability, just as the repayment of student loans is linked to graduates’ earnings if and when they get jobs.

The alternative is tens of thousands of small firms becoming bankrupt with the loss of up to two million jobs, shadow chancellor Anneliese Dodds said.

The government stepped in to help struggling businesses as the pandemic and lockdown hit Britain by offering “bounce-back” loans to companies that had to shut down as workers were told to stay at home.

But with restrictions being lifted, the government has imposed a “pay as you grow” scheme that takes no account of companies’ profitability as work restarts.

Ms Dodds said: “We need to get the economy firing on all cylinders again, but that won’t happen with businesses bogged down by debt and the government mired in sleaze.

“[Chancellor Rishi Sunak] should free up British business to drive the recovery, making his loan schemes smarter so that companies only have to start repaying when they’re making a profit.”

In a swipe at the government’s continuing descent into the mire of sleaze, she said: “Instead of pushing his officials to fix Covid loan-scheme arrangements for [former prime minister] David Cameron’s Greensill Capital, Rishi Sunak should unshackle the recovery by helping those ordinary businesses who really need his help but don’t have his phone number.”

New analysis shows that 740,000 businesses in Britain have low or no confidence that they will survive the next three months, putting almost two million jobs at risk.

The Office for Budget Responsibility has warned that without government action, more than a third of the loans, equal to £27.2 billion, will never be repaid.

Ms Dodds said a student-style repayment scheme would mean that businesses will begin making repayments only when they are making money.