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Large businesses borrowing cash from the government to support themselves through the coronavirus crisis have been blocked from paying out dividends to shareholders.

In an update to the Coronavirus Large Business Interruption Loan Scheme, the Treasury announced companies borrowing more than £50m through the scheme would be subject to restrictions, including a ban on dividend payments except where they were previously agreed.

Borrowers also cannot pay any cash bonuses or award any pay rises to senior management, including the board, and face limits on share buy-backs during the period of the loan.

The ban is a further blow to income investors, who are facing at least a £30bn dividend shortfall this year as companies including banks and insurers scrapped pay-outs to shareholders amid the crisis.

The rule change comes as the government has increased the maximum loan size available under the scheme from £50m to £200m to ensure large firms have enough finance to meet their cashflow needs during the pandemic.

The expanded loans, which have been introduced following discussions with lenders and business groups, will be available from May 26.

This is not the first time the chancellor of the exchequer, Rishi Sunak, has tweaked his coronavirus crisis policies in order to help businesses falling through the cracks.

Last month, he launched a 100 per cent government-backed loan scheme to help the smallest of businesses with loans of between £2,000 and £50,000 after concerns were raised such firms were unable to access the Coronavirus Interruption Business Loan Scheme.

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