We are all disappointed by poor returns from the portfolio

In last week’s blog we looked at the dismal start being made by The Regional Growth Fund (“RGF”) and supported Ed Miliband’s concerns over its lavish employment contracts, massive overheads (including seven regional offices) and the system constipation resulting from the slow progress of the Independent Advisory Panel.

It is therefore salutary to examine the problems at 3i which was founded in 1945 by the Bank of England as the Industrial and Commercial Finance Corporation. It started by investing in SMEs and floated in 1994. It has failed to impress its shareholders and this week its chief executive resigned. Shareholders (one of whom provided the heading of this blog) are incensed by losses from a number of the investments. The problems being addressed include the unacceptably high overheads and another round of job losses is expected. The shares stand at 214p against the value of its investments which analysts put at 290p per share. Why? The overheads, the bad investment decisions and a strategy which is totally out of place in the modern financial structure.

That is exactly the likely outcome of the RGF and the saddest consequence is that SMEs will continue to flounder from a lack of liquidity.


Unfair Dismissal laws

There is some good news for SMEs.

From 6 April 2012 employees will not be able to claim unfair dismissal until they have been paid for two years (up from one year). The Department of Trade is also considering whether SMEs with 10 or fewer staff should be exempt from the tribunals process. There would be a simpler pay-off system.

In the year to March 2011 there were 218,000 employment tribunal claims: around 25% concerned unfair dismissal. Only 8% were successful. The average award was £8,924.

Behind those statistics however lie hours and hours of expensive legal time for the business owners and the disruption to the business. Of course some claims were always justified but the rate of 8% suggests this is a good move for enterprising businesses.

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