Prime minister announces scheme for UK mid-market to imitate German model

Prime Minister David Cameron has announced that, should the Conservative party return to power after the next general election, they would pledge £1 billion to encourage a mid-market business sector akin to the “Mittelstand” businesses of Germany.

Announced as part of the British Chambers of Commerce (BCC) conference, the initiative has been called “Help to Grow” and is designed to address a perceived funding gap between early and growth-stage capital commitments.

Cameron explained:

“Here in the UK, 45 per cent of the job growth has come from our fastest growing medium-sized businesses.”

The Prime Minister continued to describe these companies as Britain’s “job engine”, agreeing with the widely-held belief that companies of this nature struggle to achieve growth under current financing deals:

“We need to think strategically about helping those small firms over the ‘valley of death’ funding gap so that they can become medium firms, and the medium firms can become larger firms.”

More details of the scheme showed that loans made available by private lenders would be guaranteed alongside a co-investment scheme similar to that employed by the British Business Bank, where £100 million of new lending would be made available. It is expected that “Help to Grow” would aid 500 fast-growing businesses.

Regarding the scheme Stephen Ibbotson, director of business at ICAEW, opined:

“While the ‘Help to Grow’ scheme could help boost business growth across the country, it must include provisions to give fast-growing firms the right kind of advice, to ensure that those businesses are finance-ready. Our members tell us that access to finance is less of a concern than it was a year ago, but businesses must look the part in order to get the finance they need.

“The fear for any fast-growing company is losing control. The right kind of advice will dispel the notion that giving up equity means giving up control, and it is imperative that the ‘Help to Grow’ pilot recognises this. By doing so, we can then put the growth of the economy on the right footing for the long term, and not just ahead of a general election.”

David Cameron’s speech to business leaders explicitly named the German Mittelstand as a model worthy of imitation; creating “strong, well-financed” businesses that in turn create employment. Cameron said that it should be the aim of business in Britain to create their own version to “export, innovate, generate new jobs.”

BCC director general John Longworth explained the debate by saying that UK would only be able to create companies on the scale of Google, Microsoft, Tata and Siemens if business leaders feel confident that finance is readily available, instead of fearing that their business was liable to tank just when the “growth button” is pushed.

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Words: Peter Cribley

 

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