Savers ‘should get tax relief’ to help grow firms

John Cridland freeSavers should be offered tax incentives if they commit to providing long-term finance for Britain’s army of ‘forgotten’ medium-sized businesses (MSBs), says a report from the CBI and BDO.

Stepping up: fixing the funding ladder for MSBs recommends ways the Government can encourage long-term debt and equity investment in these firms.

The ‘forgotten army’ of Britain’s businesses, MSBs represent just 1.8% of companies, but generate nearly a quarter of private sector revenue and make up 16% of total employment, says the CBI.

More than half of them find it hard to access a loan for longer than five years and the CBI/BDO report calls for:

  • new funding vehicles – Long Term Lending Trusts – which offer income tax relief to savers investing in long-term MSB debt funding
  • changes to the way the Enterprise Finance Guarantee works, by rewarding lenders for providing longer-term loans.

John Cridland, CBI Director-General, 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.

“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.”

John Gilligan, Partner at BDO UK, said: “Making the most of the UK mid-market is fundamental to creating a balanced and sustainable UK economy. But the UK lacks diversity in long term funding sources – particularly for mid-sized companies.

“We’re not trying to reinvent the wheel. Instead we’re suggesting an innovative adaptation of existing distribution channels.

‘The proposal also gives the people of Britain the opportunity to directly invest in long-term loan portfolios to the middle market in a regulated environment. Savers will have a new asset class to invest in and companies will be able to access the more patient capital that they tell us they need to grow.”

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