Funding promise for SMEs

Prime Minister Gordon Brown announced the Government’s intention to develop a proposal for a new growth fund that will provide finance for companies looking to invest and grow.

The news comes on the same day that Chris Rowlands’ independent review into the availability of growth capital to small and medium sized businesses is published.

Prime minister Gordon Brown says: “We are publishing today the Rowlands’ Report which shows that we have too many small and high growth companies that need capital to grow – and therefore better access to finance. Where there has been market failure in the past, our new innovation fund will provide support to high-tech start-up businesses growing to £1 billion as a fund over the coming years. And where there is a gap also in finance for companies looking to expand, we propose a Growth Capital Fund, a credible channel for private capital to invest in established and growing SMEs.”

The Rowlands’ Growth Capital Review concludes that a permanent gap exists for businesses looking for between £2m - £10m in growth capital and that neither banks nor equity investors are likely to fill this gap in the near future.

The review highlights the importance of ensuring that small and medium sized businesses (SMEs) have the access to the financing they need as the economy recovers and opportunities emerge in a new, global economy.

It adds that the potential for increased demand for this type of financing in a recovering economy should provide a strong rationale for Government intervention to address this market failure.
A vibrant SME sector displaying strong growth is vital for overall economic growth, leading to increased competition and innovation, and improved productivity.

Chris Rowlands says: “The review shows that there is a gap in the provision of growth capital to small and medium sized firms.

“This gap is permanent and we need to act in order to ensure that UK firms have the finance they need as we emerge from the recession. I believe Government should act to initiate activity to attract private capital into the field.”