The Liberal Democrats’ election pledge to re-establish the UK’s network of regional stock exchanges should be adopted by whichever party forms the next Government in order to provide an additional source of funding for businesses.
Graydon UK points out that re-establishing a network of regional stock exchanges, similar to those which operated in cities including Bristol, Cardiff, Liverpool and Sheffield up until the 1970s, would help to provide finance for businesses unable to take on additional debt but too small to attract private equity investment or access capital via the London Stock Exchange.
Martin Williams, Managing Director of Graydon UK, commented: “It is positively encouraging that the three main political parties have pledged to set up funds to provide greater support for start-up companies. However, the recession has highlighted the vital need for additional sources of funding to be made available for established small and medium sized businesses.”
Recent research carried out by Graydon and the Forum of Private Business revealed that during the second half of 2009, 28 per cent of business owners were forced to approach friends, relatives and company directors to provide funding for their business. A further eight per cent, meanwhile, found themselves having to turn to their own personal credit cards to finance their business.
Martin Williams said: “It beggars belief that in a developed economy over a third of business owners have had to take on personal financial risk because of a shortage of alternatives to bank funding. This is proof that the current system cannot be relied upon to do its job during times of economic stress.”
Graydon also points to a recent review, commissioned by the Department of Business, Innovation and Skills, which found that there is a permanent gap in the market for businesses raising between £2 million and £10 million as proof that a long-term solution is needed. According to Graydon a network of regional stock exchanges would help to address this by encouraging investors to provide long-term support to their local economy.
Martin Williams continued: “Investors are understandably more likely to invest in small businesses if they understand the local economy and the risks and opportunities facing businesses in the area. They are also likely to be more comfortable investing in companies that they can develop close ties with, allowing them a clear view of any potential bumps in the road ahead.”
“While banks serve a very important purpose in providing funding there is clearly a need for the creation of other sources of finance. A regional stock exchange is something that all political parties should be considering and should be a priority