Metro Bank PLC CEO Dan Frumkin has warned that a significant proportion of U.K. borrowers who have taken out coronavirus support loans will end up defaulting, but said the U.K. will see more startups over the next year than at any time in its history.

Metro has provided more than 30,000 government-backed "Bounce Back" loans to small businesses totaling more than £1.1 billion — accounting for almost 10% of its loan portfolio.

Speaking to S&P Global Market Intelligence, Frumkin said it was inevitable that they would not all be repaid.

"Even if 20% of those loans go bad it means 80% of those businesses are here to employ people," he said. "Month 13 is going to be an interesting moment: It is the moment when people need to start paying back the [Bounce Back Loan Scheme loans], and we fully expect there will be a significant amount of default."

However, he said there was likely to be a resurgence in economic activity, too.

"We're very focused on SMEs and I think we are going to see more startups over the next 12 months than we have seen in any period in the history of the U.K.," he said.

UK Finance, which represents banks, has been looking at creating a debt collection entity to be used by all British banks faced with recovering unpaid coronavirus loans. Frumkin supports the idea.

"[We] need a collection engine that will treat people fairly and consistently. The best way to do that is to create a collections function that is a bit of a utility where we all put our loans in together and go from there," he said.

Watch the full interview.

This report is based on an interview for S&P Global's Banking Horizons Europe 2020 conference on Oct. 1, 2020. For more news and insights from the conference, click here.