During this last week I attended a meeting of the Centre for the Study of Financial Innovation (“CSFI”). The round-table discussion, well chaired by its director, Andrew Hilton, involved around forty members and guests mainly from academia, government, think tanks and lobbyists. The title of the event was ‘Reinvigorating the quoted SME sector.’ Tim Ward, CEO of the QCA, started by questioning the future of primary markets. He said that:
- US Primary markets had fallen in number by 39%
- The LSE had declined from 1,100 companies in 2001 to 600 in 2011
- The wealthy are not being incentivised to invest in main markets – no EIS, VCT and CGT allowances
- The refusal of successive governments to remove stamp duty from share trading
- Marcus Studdard, Head of AIM, said there was much to celebrate
- LSE/AIM were the right solutions
- Essential that retail investors are encouraged back to the markets
The rest of the discussion centred around an almost universal belief that funds are the answer. Memories of 3i flooded the room. There were occasional outbursts on how important SMEs are to UK growth prospects. However a glance at the future programme suggested a lack of commitment to this subject: 5 March – ‘climate change’, 8 March – ‘Banking banana skins’, 12 March – ‘Italy’, 14 March – Brussels and so on. I fought the corner for the importance of the small-cap markets to our enterprising businesses but nobody (apart from the chairman) was really listening.
So, the future for SMEs is funds. That is why the Deputy Prime Minister’s decision to raise the monies available to the Regional Growth Fund by £1bn is interesting. As Ian King wrote in ‘The Times’, this fund is likely to go the way of Tony Blair’s Regional Development Agencies (“RDAs”) which he wrote “were a byword for waste and inefficiency.”
The funds available to the Growth Fund is less than was provided to RDAs. Ian King also wrote that “the RGF has proved to be a centralised, Whitehall cock-up. Nearly a year after the scheme was launched more than 40% of winning first-round bidders are yet to receive the sums they were awarded.”
No innovation, no small-cap markets, no growth from the SME sector.