Business Growth Fund: the analysis

Luke Johnson of Risk Capital Partners gives his view on the BGF:

“It’s a fairly crowded space. There’s no shortage of funds offering £1m to £10m of equity – there must be at least 50 firms, and a £2.5bn fund will distort the market. It will lead to softer terms being offered to businesses and I don’t think that government-backed banks like HBOS should be competing against us in this sector.

The money should be used to beef up venture capital and support emerging businesses, instead of filling a gap that doesn’t exist. Meanwhile the BGF has been spending like a drunken sailor, opening offices all over the place and paying investors huge sums. People have been recruited from the wrong end of the market – mid-market firms. 

It’s a scam. It looks like it’s helping SMEs but it’s a mid-market private equity fund. In years to come, when investors are being interviewed by a select committee, they will say that the BGF didn’t turn out as planned. Actually the BGF is doomed from the start.”

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