PRINT THIS PAGE Access to finance20/09/2006. Source: SJ Berwin. Simon Witney 
In April 2003, the UK Government declared its intention to create a new type of venture fund - a public/private partnership, modelled on the Small Business Investment Company in the United States, which would help to bridge the equity gap for businesses seeking small amounts of finance. So far this year, says SJ Berwin, the Government has announced six pathfinder Enterprise Capital Funds (ECFs), which together will raise over £160 million (€230 million) for equity investments that are each less than £2 million (€2.9 million). In April 2003, the UK Government declared its intention to create a new type of venture fund - a public/private partnership, modelled on the Small Business Investment Company in the United States, which would help to "bridge the equity gap" for businesses seeking small amounts of finance.
So far this year the Government has announced six "pathfinder" Enterprise Capital Funds (ECFs), which together will raise over £160 million (€230 million) for equity investments that are each less than £2 million (€2.9 million). That exceeds the original expectations, and should make a real difference to a large number of entrepreneurs who would otherwise struggle to get their new venture off the ground, or to take it to the next stage of its development.
The ECF programme is one of a number of achievements highlighted by the CBI (the UK's business organisation) in its report on Access to Finance, published last week. Evaluating progress since 2000, when the British Government set itself the goal of making the UK "the best place in the world to start and grow a business" by 2005, the CBI says that "significant progress" has been made.
As well as applauding ECFs, a programme that it would like the government to extend further, the CBI makes the general point that the Small Business Service - the agency set up in 2000 to promote government policy in this area - has been successful in "delivering better access to finance for new and growing companies".
But there is more to be done. The report calls on all parts of Government to come together to develop a strategy for the next decade, to ensure that momentum is not lost. The CBI also makes a number of very specific recommendations, which include changes to tax rules and further development of existing support schemes.
Not all of these are uncontroversial - for example, there are suggestions that giving tax credits for capital expenditure to loss making businesses could encourage reckless growth - but they provide an excellent shopping list of measures that should be carefully considered by policy-makers in the UK, and elsewhere in Europe.
Key suggestions include extension of tax relief for investment in Venture Capital Trusts, improvements to the Enterprise Investment Scheme, and better administration of R&D tax credits for small business.
There isn't much that is new in the CBI recommendations - a reflection of the fact that there are many schemes and incentives already in place. The main message is to improve and extend what is already there. Benchmarking studies (including one published by the European Private Equity and Venture Capital Association) often put Britain's environment for venture capital ahead of that in other European countries.
But the Government needs to drive forward new initiatives if it is to stay that way.
Simon Witney
SJ Berwin is a pan-European law firm with a particular focus on private equity. It has offices in London, Frankfurt, Munich, Berlin, Madrid, Paris and Brussels. If you would like further information on our services to the private equity industry please contact Simon Witney in our London office 020 7533 2222 or visit our website at www.sjberwin.com.
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