The CBI report, Slice of the Pie, highlights the UK’s overreliance on traditional debt finance and the serious under-utilisation of equity finance. Half of all small and medium-sized firms rely on bank loans, while 36% use overdrafts. By comparison just 3% use equity finance – this lags behind the European average of 7%.
That’s despite the majority of growing businesses which have used equity finance reporting that it had a positive impact on their company (66%), and 4 out of 5 saying that they would use it again to fund business growth. 81% would recommend equity finance to other companies.
Katja Hall, CBI Chief Policy Director, said:
"We need to shatter the equity finance glass ceiling and encourage growing firms across the UK to use this largely untapped resource. It’s a myth that using it results in loss of control and decision making.
"Equity finance is one of the most effective ways for small and medium-sized firms to access investment capital and there are plenty of investors who take a minority stake.
"The Government should pilot a tax incentive for retail investors who hold their equity stakes for a certain period of time, to stimulate and nurture more long-term investment culture which growing firms are looking for."
