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Money v Making Stuff-Should Britain bid farewell to the golden egg of banking.
Still on life support
Posted: 08 July 2011 16:20:10(UTC)

Joined: 27/09/2010(UTC)
Posts: 52

We already have an organisation in the FTSE 100 specifically designed to provide business funding

http://www.3i.com/about3i/key-facts.html

For smaller businesses;

http://www.bbaa.org.uk/

We also have EIS schemes, VCTs, 21 new enterprise zones (with tax breaks and infrastructure support), not to mention the £47.2bn in lending to enterprise from the big 5 banks in Q1 alone

The efficiency of this large support network for businesses means that viable companies often find that capital is available when required. By skewing this model to artificially support industries where we have limited or no competitive adavantage we are storing up future problems. When companies consequently fail, the cost of the bad loans and lost investment capital is eventually born by our society as a whole in terms of unemployment, higher costs as lenders recoup losses etc.

If any changes should be made, we should be looking to improve the incentives for investment into starts ups even further, provide tax relief at investor level, remove CGT on enterprise investments from Day 1, thereby encouraging more capital investment but allowing the market to ascertain which businesses to back. That way, if you have a great manufacturing idea, or engineering, or marketing, or software, or catering, or dare I say it financial services (?!) then funding would be even more available.

Jeremy Bosk
Posted: 08 July 2011 17:47:27(UTC)

Joined: 09/06/2010(UTC)
Posts: 1,316

Still on life support

You make a good point about the range of financing options available. But they nearly all have drawbacks. Many are not open to small investors because the organisers do not want to deal in penny packets, because regulators deem them too risky unless you are a certified experienced investor / high net worth investor. Others have ludicrous management fees (from the investors angle) and want outrageous interest or slices of the equity from the entrepreneurial view. Many are not interested until products are near commercial viability and only in providing finance in the millions or tens of millions. Backing small companies and taking an active management role is very time consuming and expensive.

The companies with the worst problems are those with a long term development horizon and very complex technology / science r&d to do. These suffer from the fact that most investors have short term horizons, most investors do not understand the science and technology, most investors are unable to adequately assess he competition, the future market place, future financing needs or the rime scales involved. Warren Buffet would not touch such companies with a ten foot barge pole and rightly so because they are well outside his understanding. There are few investors with the necessary expertise which is why the companies start out underfunded, take forever to get anywhere and when (if) they are ready to scale up with a viable product investors have lost interest and belief. So they fall prey to the big companies, usually foreign owned.

Science and technology based industry cries out for a large scale portfolio approach in which public funds supplement all the sources you mention above. 3i is in trouble with investors because it has backed so many companies that no one company is going to make much difference to the bottom line. It has become unwieldy.
Anonymous Post
Posted: 08 July 2011 19:36:41(UTC)
Anonymous 1 needed this 'Off the Record'

1. Update on Bombardier, and 2. Response to Still on life support/Jeremy Bosk.
From today's Derby Evening Telegraph, available on-line. "Three letters pleading for action but still David Cameron remains silent."
1. 1400 jobs already gone, not including the supply chain.
Mr David Cameron MP
Oct 10-Creating a New Economic dynamism.
"indeed the UK exports more to Ireland than to Brazil, Russia, India, China - combined."
"My approach is clear, British business should have no more vocal champion than the British Government and that's why I have put the promotion of British commerce and international trade at the heart of our foreign economic policy."
March 11- Spring Conference.
"Together we'll create the business, we'll create the jobs, we'll create the opportunities, we'll light the spark of enterprise, we'll fire our economy, we'll drive our country forward. And together we will do it."
July 11-Derby City Council leader-a Conservative, Philip Hickson has sent three letters to Number 10 asking for an urgent meeting with David Cameron to talk a about a plan to save UK's last remaining train-maker.
Mr Hickson said "I'm frustrated and annoyed that no 10 seems to be taking no interest in this issue."
Business Secretary Vince Cable has phoned me twice and each time I told him that so far no response. He said he would look into it.
"We will keep on knocking on the door of no 10 until he agrees to meet with us."
The Derbyshire and Nottinghamshire Chamber of Commerce has sent a letter to no 10.
The Chief Executive said "The Chamber is extremely disappointed not to have received a response."
I think the above summarises the situation quite well.
All mouth and no action?
2. I tend to agree with Jeremy, that there are serious shortcomings on the funding side.
Banks are more interested in their bottom line, rather than provision of long term finance.
Venture Capital, similarly has a 3 year interest, not long term, etc
Short termism for short term gain is the problem.
When coupled with uncertainty, interest rate changes, possibility of instant withdrawal of loan and overdraft facilities, it is simply a disaster.

Prof Eman
Anonymous Post
Posted: 09 July 2011 11:41:21(UTC)
Anonymous 1 needed this 'Off the Record'

Dear all
Just wanted to add two more suggestions to my list.
19. Prevent the type of takeover as Cadbury's by Kraft, when the purpose is to close down a profitable business and move it to another country, as well as other ulterior motives like asset stripping. For example prevent a closure, after takeover, through legislation, from any time between one and five years, depending on the size of turnover and /or number of people employed. Small Companies say one year, and very large Companies say five years. Introduce legislation in S/T and apply in L/T.
20. Set up an SPA - Strategic Planning Authority, to look at L/T requirements of the economy/industry in particular, to counter the pit falls of short termism. In the S/T, Banks time horizon-Profits at next AGM, Venture Capital 3years, Politicians- maximum five years or less, to next General Election. The Authority would be responsible for L/T Planning, and The Industry Bank with its Investment arm. To be successful it would need to be at arms length to the sitting Government. Consider the idea and its implications in S/T, set up, and operate in L/T.

Prof Eman
Anonymous Post
Posted: 09 July 2011 23:34:30(UTC)
Anonymous 1 needed this 'Off the Record'

Just a short addendum
BBBC News UK 09/07/2011, by Nick Robinson-Sir John Major addresses devolution argument
Today he calls for what some call "devo max"
Scottish Parliament to be given powers to control everything except foreign affairs, defence and the economy.
Here are some issues we have been considering-
"...and warns that the country's political classes are too obsessed by short term politics and too complacent about the signs that the country is in long term decline."
"In terms of GDP, the UK is the sixth most wealthy country in the world. but our national balance sheet carries many liabilities. Our infrastructure is old. Our health service is creaking. Whilst the best of our education-especially higher education -is world class, some of it is unforgivably awful."
"We are up to our ears in debt. The Exchequer is empty. The gold is gone. the post-dated cheques are accumulating interest. We are over-taxed. We have an underclass:poorly housed and unmotivated."
We are no longer an Empire, nor will we be aver again. We are a shrinking military power.By choice, and with majority public approval, we are semi-detached members of the EU. And even America-for so long our closest ally who generally sees the world as we do-is turning her face to the East, as self-interest determines she must."
Well, could not have put it better.
Seems some politicians are aware of some of the problems we have been discussing.

Prof Eman
Jeremy Bosk
Posted: 10 July 2011 10:57:46(UTC)

Joined: 09/06/2010(UTC)
Posts: 1,316

Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/...bdc0.html#ixzz1RetK6SVO

"Research has shown that during the past generation, start-ups less than five years old have accounted for all net job growth in the US".

=========================

This is a long and interesting article dealing with many of the issues also faced in the UK. Registration gets you 30 free stories a month from the FT. Well worth the time and trouble.
Jeremy Bosk
Posted: 10 July 2011 22:08:03(UTC)

Joined: 09/06/2010(UTC)
Posts: 1,316


'Gold rush' in nano technology

As universities search for new sources of income, how do you turn academic excellence into commercial value?

Jonathan Flint, head of Oxford Instruments and Today's Friday boss, explains his company's success.

http://news.bbc.co.uk/to...wsid_9527000/9527647.stm
Anonymous Post
Posted: 11 July 2011 11:29:39(UTC)
Anonymous 1 needed this 'Off the Record'

An analogy. I am sure that Engineertony will love this, as much as I love his Wild West Stories.
David is now in the driving seat, Ed is on the left, and the right wing are driving a lorry on the right.
At the front of their vehicle is Blue Sky B driven by Murdoch, with Rebekah assisting.
At the rear of the procession we have thee Services band wagon rolling along.
Vince the back seat driver has now been disabled, the best he can manage is - I'll see what I can do, which seems very little.
As such what chance is there of a change in direction?
Clearly David has been hemmed in and is finding it very hard to steer properly, for example, he is finding it very hard to say NoW to Blue Sky B.
Unless we change direction it seems to me that we are heading for another crash.
I wonder how soon the PIGS will become the PIGIES, Italy and England included?
Happy investing but do take care where you invest. Anything is still possible.

Prof Eman
Dr Jimbo
Posted: 12 July 2011 10:45:57(UTC)

Joined: 10/06/2010(UTC)
Posts: 21

John Major's remarks need to be made a good deal more publicly if the UK is to begin managing its change in status from a faded past empire to a small but balanced democracy with limited military ambitions.

One thing he did not mention was our population. It is now too large to sustain whether we have more manufacturing activity or not. Our housing crisis is supporting property prices that are absurdly high, even after significant falls outside the Capital. A recent TV programme by John Snow illustrated the failure of the rebuilding schemes in Stockport due to council underfunding and community break-up and the apalling and criminal issue of illegal immigrants forced to share sleeping quarters in backyard sheds in some major cities.

All the suggestions made in this forum about providing a better environment for new start-ups and encouragement for growing manufacturers are well made. The overriding issue, however, is that our underlying political and social infrastructure needs radical change. We must stop acting out these 19th Century fantasies of Empire and take a hard cold look at what we can and cannot afford. If we were not spending huge sums on military adventures, acting as an international philanthropist, pretending we can absorb the world's disadvantaged and acting as a test bed for self-serving European lawmakers we might be able to balance our books a little better.

Perhaps we could then concentrate on educating our own population, replace our crumbling infrastructure, invest in new industry and wake up in the morning with a more robust view of what the UK stands for as an independent and competitive geography.
Anonymous Post
Posted: 12 July 2011 11:33:06(UTC)
Anonymous 1 needed this 'Off the Record'

To add oil to a burning fire-
the Independent by Sean Ferrell Monday 13/06/2011-structural jobe deficit must be tacvkled, says CBI-(Employers' lobby group urges the Government to take action)
"There are 2.46m people unemployed in the UK but the total number masks deep problems, including 5m working-age people on benefits and 2m children in households where no one works."
On a strategy for growth to reshape the economy-It is seeking views to feed into its own proposals, which it will put to Govt later this year.
BBC News Business-UK economy recovering too slowly, says BCC(British Chamber of Commerce)
"Another survey suggested confidence among UK manufacturing firms had fallen to its lowest level for two years."
"Our economy is out of balance. The public sector is too large and the private sector is too small"
"To minimise dangers of a setback, the Govt must implement more growth-enhancing policies that will enable private sector firms to increase productivity and drive the recovery forward."
Dr Jimbo, perhaps you would like to contribute to our discussion on - Economics, Inflation, UK.
Your views would be welcome.
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