Equity financing RIP?

Thankfully there are some people in influential positions who are starting to talk about getting equity finance back on the radar. 

First up was the CEO of the London Stock Exchange, Xavier Rolet, in an interview with the Sunday Times earlier this month. Rolet came up with the truly astonishing statistic that 55 per cent of companies listed on The Alternative Investment Market use credit cards for finance. This is a devastating indictment of how poor the fund raising ability of AIM has become. As Rolet points out: “The tax system clobbers equity, whereas if you get debt, you get tax deductions… the tax system favours debt, and every crisis is about debt. It’s important people understand that.” 

Are you listening Mr Osborne?

While it is good to see Rolet highlight the problem, I fear he has – in reality – given up all hope of persuading our government to bring back the wider range of tax incentives for equity investors, as his latest initiative is to persuade more American companies to list on AIM. Hardly helpful if you are serious about persuading the Treasury to reignite equity investing in our home-grown companies.

Next, was an encouraging inaugural speech from Clive Parritt, the newly installed president of The Institute of Chartered Accountants in England and Wales. Normally, you wouldn’t expect the country’s bean-counters to be that interested in how SMEs are financed – but Parritt chose to highlight that the ICAEW will continue to argue for equity finance saying: “Of course banks need to lend more to smaller business and, above all, empower local managers to do that. But, even more importantly, the government needs to encourage equity finance”. 

He followed this up by announcing the launch of The Business Advice Service to support SMEs. This will be a national service and will provide companies with access to top quality advice. Hurrah! Accountants, as opposed to investment bankers and lawyers, are still regarded by many in the business community as adding value, so it’s good to see them taking a real interest in the travails of smaller companies.

Rolet and Parritt are in a position to get the attention of our top politicians and civil servants and highlight the importance of equity financing for the nation’s small, growing businesses. They really must use their time at the top to get this message across to our decision takers.

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