Seriously, we support George

Enterprise Britain has been staggered by the muted response to the proposals made the Chancellor of the Exchequer at the Conservative Party Conference.

We have been consistently critical in particular of Vince Cable and his Department for Business at their lack of progress in helping Britain’s enterprising businesses. We support the new shadow Business Minister Chuka Umunna in his criticism of the Business Growth Fund which we believe will become a gravy train for its many highly paid executives.

However George Osborne delivered some exciting and visionary ideas for helpful business liquidity. Although the full details will not be known until the publication of the Government’s Growth Plan on 29 November 2011 the basic concept is to expand the corporate bond market for small and enterprising businesses (“SMEs”).

The Government’s role will be to provide credit for SMEs by the securitisation of packages of bonds (and perhaps loans). Perhaps the Government might lend individual investors funds for bond purchase as per the US scheme.

The details as they stand are vague but the response from the financial press was guarded:

‘Financial Times’ (Jonathan Guthrie:4.10.11): “…a complicated answer to the wrong question It is…pushing on a piece of string.”

‘CityAM’ (Allister Heath: 4.10.11): “..the first problem is that the government is once again focusing on debt financing rather than equity……Osborne’s scheme will backfire spectacularly if it is ever implemented properly.”

‘Daily Telegraph’ (Damian Reece: 4.10.11): “…I fear the idea may run into a familiar problem..it’s a shortage of demand.”

‘The Times’ (Editorial: 5.10.11): “the more one looks at it, the less clear it is how it will operate.”

‘The Sun’ (Tom Newton Dunn: 4.10.11): “George Osborne yesterday revealed plans to lend “tens of billions” to small firms.”

In the ‘Financial Times’ (6 October 2011) David Blackwell wrote an article highlighting the concerns about the PLUS Market which is an important source of funds for micro and smaller companies. AIM is also rather quiet and equity finance is difficult to source. My colleague Dirk Van Dijl has blogged separately about the issues.

We applaud the Chancellor for trying to promote something adventurous. We await the Government’s Growth Plan at the end of November with expectation.

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