Too much emphasis is being placed on helping high-risk start-ups, with medium sized firms falling behind, business leaders said today.
Speaking at the launch of a CentreForum report on boosting economic growth through SMEs, Business Secretary Vince Cable came out in support of tax changes that would help funnel more investment to these key job generating companies.
CentreForum’s recommendations, if enacted, are designed to plug a £59bn funding gap for UK SMEs in four years.
The report calls for the abolition of stamp duty on all share transactions, or alternatively just those on growth markets such as AIM, and also asks that ISAs include shares traded on SME equity markets like AIM.
It also proposes that capital gains tax be reduced, and the 5% minimum shareholding qualification for entrepreneurs’ relief removed.
This would help the “few 1,000 potential gazelles” that have serious growth potential, explained CBI director-general John Cridland.
It is hoped that reforms like these will help encourage investment and amend an imbalance between equity and debt funding, which disproportionally impacts medium-sized companies.
“Improving access to equity finance for small and growing businesses should be an absolute priority for both policymakers and market participants,” said Xavier Rolet, Chief Executive of London Stock Exchange Group.
“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.”
The LSE, which sponsored the event, has publicly questioned the ability of government and banking institutions to make up for the shortfall in investment and deems private and company funding as crucial to growth.
The UK and EU have so far fallen behind in this respect, with about 70% of SME funding still coming from traditional sources, compared to 18% in the US, Rolet said.
The report comes on the back of LSE’s announcement it would set up a niche stock market, specifically tailored to medium fast-growing firms, such as tech companies.