The recent emergency Budget served to emphasise the importance of Government intervention in supporting the provision of ‘risk finance' to the UK's small to medium enterprises (SMEs). This is a key issue and, following on from the various measures announced, the Government is due to publish a paper on business finance. It has also announced plans to create a new Growth Capital fund to help keep up funding for SMEs beyond the early stage phase. This could provide serious scale in the region of £0.5 billion, in order to deliver support to this crucial part of the economy. We welcome these developments as we believe it's essential that Government intervention in the smaller company space continues.

Investors and advisers will know that the introduction of Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EIS) and various other funding initiatives by the Government over the last fifteen to twenty years has enabled investors to give support to SMEs. However, Government intervention goes back much further than that and it needs to be on a major scale if we are to keep on delivering the support that SMEs need.

This was emphasised in the Rowlands Report, released in 2009, something that the Government will be referring to as it considers how best to help SMEs. That report pointed out that once businesses progress from being small to medium sized, they become part of a group that represents over a third of the UK's GDP, yet they're underserved in terms of funding, both bank and equity financing, and often need help and guidance to be successful. The report recommended more Government intervention to help these companies continue growing.

Looking back at how SME investing has developed over the years underlines this and points towards further intervention in the future. From the mid 1940s, the Government-initiated Industrial and Commercial Finance Corporation (ICFC) existed to provide funding and support to smaller companies. It did this with great success; a Government intervention that lasted over 40 years, which really helped to shape the environment for SME investment, and subsequently the private equity industry. However, originally part owned by the Bank of England and high street banks, ICFC came to be rebranded in the 1980s as 3i, and floated in the 1990s on the stock market. It came to focus more on larger management buy outs than delivering funding to SMEs. This has left a hole in funding…

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