Department for Business, Innovation and Skills
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Government Proposal to Help Fund Business Growth
The Government today welcomed the publication of Chris Rowlands’ independent review into the availability of growth capital to small and medium sized businesses.
Welcoming the report, Prime Minister Gordon Brown announced the Government’s intention to develop a proposal for a new growth fund to provide finance for companies looking to invest and grow.
“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 said:
“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.”
Business Secretary Lord Mandelson said:
“I welcome the conclusions of this review by Chris Rowlands. It is now for Government and the market to work together to address these issues effectively. It is vital that UK SMEs can secure the investment they need to grow.”
James Caan, member of the advisory panel for the Rowlands Review, said:
“The report shows that we have an urgent need to support UK small businesses in finding finance, especially as our economy recovers. I am glad to see the government committed to working with the private sector to ensure that this happens.”
Notes to Editors
1. The Growth Capital Review was announced in the New Industry, New Jobs strategic plan released on 20 April 2009 and launched on 3 June 2009.
2. A copy of the report can be found at http://www.berr.gov.uk/files/file53698.doc
3. The report focussed on the following key issues:
Examined the market for investments with a return profile below that of Venture Capital/Private Equity investors and consider the availability of, and access to, capital of this nature.
Considered the appropriate form of any intervention in terms of scale, number of companies, asset class and size of those companies, sectors and size of investment.
Considered what infrastructure is required to deliver an effective supply of growth capital including institutional structures/partnerships with the private sector, skill sets, business models and cost bases in a cost effective manner for both public and private investors.
4. Christopher Rowlands started his career as a banker with Barclays before joining 3i in 1984. He has recently left 3i where his last post was Managing Partner for Asia. Christopher spent six years with Arthur Andersen leading European corporate finance business.
5. The advisory group carrying out the review consisted of:
James Caan, CEO Hamilton BradshawChristina McComb, PUKGordon Murray, Professor of Entrepreneurship, Exeter UniversityRay Perman, Scottish EnterpriseDavid Quysner CBE, Chair AbingworthDanny Truell, CIO Wellcome Trust
Department for Business, Innovation & Skills
The Department for Business, Innovation and Skills (BIS) is building a dynamic and competitive UK economy by: creating the conditions for business success; promoting innovation, enterprise and science; and giving everyone the skills and opportunities to succeed. To achieve this it will foster world-class universities and promote an open global economy. BIS - Investing in our future.
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