Emergency government loans designed to help companies through the pandemic could turn “once-viable businesses into zombie basket cases”, Various Eateries CEO Hugh Osmond has said.

Writing in a column for The Times, the former chairman of Punch Taverns, said that tens of billions of pounds of emergency loans were “just digging businesses further into trouble”.

He described the chancellor’s loan schemes as “the morphine masking the pain of a life-threatening wound”, adding: “What the economy needs now is more equity investment. Equity, not debt, is the engine of recovery and growth.”

Almost £60bn has been lent via four taxpayer-backed lending schemes to businesses.

Osmond said: “Loading debt upon debt might have kept things ticking over, but these schemes are turning once viable businesses into zombie basket cases.”

He said that it was unclear how much of the debt would be paid back because of the impact of new restrictions to curb a resurgence in infections.

“Thanks to all the well-intentioned state interventions there are too many businesses carrying too much debt — all of which will need to be paid off, written off or restructured. The contractual obligations of debt are a millstone around the neck of businesses.”