Business Secretary, Vince Cable has launched a consultation into raising finance for private sector investment.

The new paper, entitled ‘Financing a private sector recovery’, looks at a range of issues surrounding access to capital.  In particular, it raises concerns that small businesses are unable to access funds as investors look higher up the economic ladder. 

ACE recommended to the Government in March this year that they explore re-establishing regional stock exchanges. 

The proposal was highlighted several times throughout the consultation.  

The paper seeks views on whether regional stock exchanges could boost investment and help to overcome regional economic disparities.  It also ponders whether there are barriers to listing with exchange-regulated markets that particularly hinder small companies. 

There are a range of other proposals highlighted in the consultation.  

ACE welcomes this paper and the fact that regional stock exchanges are now firmly in the Government’s sights. 

We look forward to engaging with this and helping to find solutions that work.

One of the biggest barriers to putting up a building or growing a business is the up-front costs.  In this sense, the financial services sector plays a pivotal role in leveraging the capital required to get started.

Interest rates are at an all-time low, with little sign of an increase any time soon.  Yet some engineering businesses and their clients are still struggling to find loans that are affordable.  Without access to viable sources of credit, it is difficult for businesses to grow and projects to be developed without taking unreasonable levels of financial risk.

Lack of affordable lending also impacts on the housing market.  The inability to gain sensibly-judged, affordable mortgages reduces the incentive to build more homes and increases pressure on the private rental market.

It is clear that the implosion of the sub-prime market has led to a rethink of how financial risks are assessed.  However, reverting to a risk-averse approach to lending is not sustainable in the long term; certainly not if the reports that the UK needs another two million private sector jobs are to be believed.

The Government is intending to publish a green paper in the summer setting out proposals to get the financial system lending again.  Along with the recent proposals to establish a Green Investment Bank, this is to be welcomed as a step forward in the debate.

Yet any proposals that are put forward must be carefully thought out.  Poorly developed regulation could be difficult to implement.  At worst, it might result in more expensive credit – and business will be the worse for it.

Industry will be looking for sensible approaches that encourage responsible business growth and sustainable development.