Looks cosmetic, probably fifty quid max to touch up and polish? As others say, an independent assessment of the damage and repair cost would be helpful. Maybe they’re just chancers and seeing if you’re a mug?
I’d expect a hire bike to have some wear and touched up areas or even the odd chip. I would not be surprised if they rehired that frame without any issue. If they’re operating a ‘you broke it then you bought it policy’ then they should be sending you the damaged one.
However, if you have unwittingly contracted to pay for a new frame you may be a good distance up shit creek with only your hands as paddles. On the other hand, even a small claims court action is a lot of work and there’s probably a much more reasonable settlement to be made to avoid that.
What does the contract say?