Growth Companies

Opening Up Capital Markets for Mid-caps

A U.K.-government commissioned report suggests reforms to open up capital markets to mid-cap corporates. So far, its ideas have been well received.
Andrew SawersApril 11, 2012

An independent review of alternatives to nonbank finance for smaller and midsize companies, led by Tim Breedon, the chief executive officer of insurance group Legal & General, has been welcomed by organizations such as the Association of Corporate Treasurers and the Confederation of British Industry, an employers’ group.

In a statement issued after publication of the Breedon report, the CBI said: “To help stimulate demand for bonds issued by mid-sized businesses we need to develop a retail market, and the report endorses our proposal of a new type of tax-free savings [account].” The report put forward proposals on how to work toward developing a private-placement market in the United Kingdom.

The report also drew attention to the financial strength of larger companies as a potential untapped resource for smaller businesses: “One strong theme that has emerged is the potential for businesses to work more effectively together through their supply chains,” Breedon said in the report.

“The U.K. corporate sector collectively runs a large surplus, which we believe can be deployed more effectively, particularly during a period of historically low interest rates. This aspect of our work, I believe, has been particularly important: it represents a significant, high-potential part of the financing landscape outside the banking arena, which remains underdeveloped.”

Andrew Sawers is editor of CFO European Briefing, a CFO online newsletter.