The Quoted Companies Alliance (QCA), the representative body for the UK’s small and mid-cap quoted company sector, has urged the Government to take immediate action to stimulate the UK’s small and mid-cap quoted sector, the engine for economic growth and jobs.
As part of its response to HM Treasury’s Green Paper, ‘Financing a Private Sector Recovery’, the QCA has suggested a number of proposals in three areas to improve investment in and the provision of capital to the sector:
1. Investor enablement: Participation in the small and mid-cap sector from a wider pool of private investors should be encouraged in order to drive private sector recovery. The QCA’s suggested proposals include:
- Create a database of qualified and/or professional investors, which would list the types of issues these investors are interested in, and which brokers could consult to find additional investors, ensuring that all available regulatory exemptions are used.
- Better access to research on small and mid-cap quoted companies for private investors, who typically are excluded from access to research funded by issuers due to financial promotion rules.
- Create a financial market index that is representative of the UK economy to provide investors with improved choice and encourage investment in companies which grow and produce jobs in the UK.
2. Improving access to non-bank finance: There is significant interest in exploring new debt products, including a corporate bond market, for small and mid-cap issuers.
3. Incentivising investors and stakeholders: The UK must review its approach to encouraging entrepreneurial behaviour. In particular, the QCA proposes:
- Remodel the purpose of the Venture Capital Schemes (Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs)) to focus on creating jobs.
- Maintain and widen the Venture Capital Schemes, specifically with regard to the qualifying criteria for companies including limits on employees, in order to provide finance to small and mid-cap companies and fill the funding gap.
- Reform Capital Gains Tax by adapting the current Entrepreneurs’ Relief to a ‘Stakeholders’ Relief’. It should be targeted at employees and officers, business angels and long-term investors – otherwise, those who make the most meaningful contribution to the success of the business.
- Eliminate Stamp Duty on shares outside the FTSE 350 immediately and announce a gradual reduction in Stamp Duty overall in the UK.
- Allow quoted company shares, e.g. AIM and PLUS-quoted, to be included in Individual Savings Accounts (ISAs).
- Create an ISA product which encourages investment in local and regional companies.
Tim Ward, QCA Chief Executive, said: “The QCA has for some time been pointing out that a holistic review of how small and mid-cap quoted companies can raise finance more efficiently is long overdue. We see this Green Paper as the perfect opportunity for Government to really be able to affect change in the sector.
“The QCA believes that a vibrant small and mid-cap sector is the UK’s best opportunity for increasing sustainable employment. We believe that our proposals should be considered as a package, which will contribute significantly to a private sector recovery. We look forward to working with HM Treasury and the Department for Business, Innovation and Skills in further exploring our proposals.”
The QCA’s response to HM Treasury’s consultation ‘Financing a Private Sector Recovery’, is available on its website by clicking here.