Member Article

Government action need to unlock equity finance potential

The Government can narrow the estimated £59bn funding gap facing SMEs over the next four years by encouraging businesses to access equity finance on the capital markets, a report from CentreForum suggests.

The think tank urge the Chancellor to provide tax incentives for SMEs to use equity finance and say the the current system favours debt finance.

Proposals within the report include: abolishing stamp duty on all share transactions; reducing the rate of capital gains tax on shares to account for corporation tax; and requiring the FSA and its successors to provide guidance on their conduct of business regulations to encourage the dissemination of research on SMEs.

John Cridland, CBI Director-General, said: “Medium-sized businesses (MSBs) are too often the unpolished jewel in the crown of the UK economy, held back by a lack of finance.

“As we take steps to re-wire the banking system, we need to see a culture shift among MSBs to overcome what this report correctly identifies as a ‘bias against equity’.

“We need to help more medium-sized firms to realise their potential by making their shares available on public markets, abolishing stamp duty on all AIM market share transactions and by including them in share ISAs.”

Vince Cable, Secretary of State for Business, Innovation and Skills, said: “The government is committed to ensuring SMEs can access equity finance more easily, especially those businesses with high growth potential helping to create a stronger economy. CentreForum’s report contains some interesting ideas for how access to equity finance for SMEs can be improved.”

Xavier Rolet, chief executive of London Stock Exchange Group, added: “We wholeheartedly support the recommendations in CentreForum’s report. Improving access to equity finance for small and growing businesses should be an absolute priority for both policymakers and market participants.

“Job creation and economic growth rely on the ability of our innovators and entrepreneurs to adequately finance their ambitions, while avoiding over-reliance on debt.”

This was posted in Bdaily's Members' News section by Tom Keighley .