The Confederation of British Industry (CBI) is calling for the introduction of new tax incentives to boost investment in medium-sized firms.
In a joint report entitled ‘Stepping Up: fixing the funding ladder for MSBs’, the CBI and a major financial advisory firm have outlined a long-term plan for helping businesses achieve their potential.
The report proposes the introduction of new funding vehicles, labelled ‘Long Term Lending Trusts’, which would provide income tax relief to savers investing in long term medium-sized business debt funding.
The CBI said this would work in a similar way to the existing Venture Capital Trust scheme, and would cost the government an estimated £310 million a year. However, it argues that the measure ‘could unlock billions of new long-term loans.’
Commenting, CBI Director-General John Cridland said: ‘Building up a British ‘mittelstand’ of successful medium-sized businesses is mission critical to our economic future. With little recognition, these firms quietly toil away, creating jobs in communities and boosting growth in every corner of the nation.
‘A key part of unlocking their enormous potential is for the Government to fix the funding ladder, filling in the gaps in supply of long-term finance that the UK’s brightest growing firms need to succeed.’
He continued: ‘Incentivising savers to invest in our businesses for the long-run is a win-win. It offers them attractive, alternative investment packages, while helping propel medium-sized businesses along their growth path, boosting the economy as a whole, and enhancing productivity.’
The report also suggests that the Enterprise Finance Guarantee initiative should be adapted to reward lenders for providing longer term loans.
According to the CBI, the ‘forgotten army’ of Britain’s medium-sized businesses account for 1.8% of companies, but generate almost a quarter of private sector revenue and employ 16% of the working population.