CBI backs small business

The CBI has urged the Chancellor to be more ambitious when finalising his plans to boost the funding available to small firms.

It supports Treasury's proposals for American-style Small Business Investment Companies (SBIC) announced in the Budget, but warns that they could fail to plug the funding gap because the threshold has been set too low.

Publishing its response to the Treasury's consultation, 'Bridging the Finance Gap', the CBI says that its member companies report difficulty in obtaining equity finance for sums between £250,000 and £3 million as commercial investors have favoured bigger sized deals.

Matthew Fell, CBI's Head of Enterprise and Small Business, said: "The CBI supports the need for Small Business Investment Companies, which have played a key role in stimulating venture capital in the USA. However, if they are to succeed in the UK they should be allowed to make cash injections of up to £3 million, rather than the £1 million proposed by the Treasury.

"The UK does not have the same corporate venturing culture that exists in the US. To give the SBICs the maximum chance of success, they must be flexible in their approach, involve the minimal amount of bureaucracy and keep 'deal costs' to a minimum."

The CBI believes the Chancellor should do more to encourage investment in small businesses at a time when market conditions are reducing the funds available for investment. It believes the attractiveness of both the Enterprise Investment Scheme and the Venture Capital Trusts would be enhanced through more generous tax breaks and the removal of all unnecessary restrictions on their use.