Vince Cable helps launch the Business Growth Fund

Business Growth Fund plc was incorporated in February and last week the enterprise was formally launched in Birmingham. It follows a period of consultation by a taskforce made up of CEOs and senior representatives from the largest UK banks including Barclays, HSBC, Lloyds, RBS, Standard Chartered and the British Bankers Association. The launch was supported by Vince Cable, the Secretary of State for the Department for Business, Innovation & Skills (BIS).

The initial investment fund will be £2.5 billion and it is intended that it will be injected into companies that have an annual turnover between £10 million and £100 million, and can demonstrate that, with the right capital, they will be able to achieve sustainable growth.  The fund will invest between £2 million and £10 million in individual businesses in return for a minimum 10 per cent equity stake and possibly a seat on the board. 

Some have been quick to criticise the initiative because it will not help smaller businesses and initially it will only accommodate between 250 and 1250 businesses.  I personally think it is a step in the right direction.  If successful, it will hopefully change the culture of banks from being expensive short-term loan arrangers to being long-term investors in businesses.

It is very much in line with the Government’s view that growth should be led by the private sector and not by public sector funding. BIS is involved in many other initiatives as set out in Bigger, Better Business.  The Department intends to:

• support start ups through a tailored package of measures;
• improve the provision of online information; and
• facilitate a network of experienced business mentors and coaches.

It does not wish to fund any of these initiatives. It simply intends to create the right environment for private enterprises to take the lead.  UK Training has never sought Government funding for the development and delivery of training.  Instead we have chosen to be an independent training provider competing in the market place.

My view is that such funding can be difficult for Government to control and lead to excessive bureaucracy in trying to manage this form of expenditure.  My overriding concern is that it distorts the market place and leads to unfair competition, favouring public sector funded training providers over privately funded training providers.  I have no issue with Government buying in the services of experts in the private sector to help deliver its strategy.

Each business within a market economy has got to be viable and sustainable.  There are many businesses which have great potential because they have the right people offering the right products at the right price to the right markets at the right time but unfortunately are not financially viable.  Many growing businesses fail because they lack the right finance.

Stephen Smith
Managing Director
UK Training (Worldwide) Limited