The financing divide

AS MENTIONED in my post last month, the results of our second QCA/BDO Small and Mid-Cap Sentiment Index are now out and I can tell you that there is a fascinating divide between advisers and companies as to whether the world out there is a gloomy or a bright place.

While companies and advisers remain pessimistic about prospects for the UK economy, 65% of small and mid-cap companies are relatively optimistic about their own prospects over the next 12 months. But, advisers do not share this optimism – only 20% are optimistic about small and mid-caps’ prospects. Several commentators have recently suggested that this pessimism may be preventing companies from raising the finance which will start to put the economy back on a growth path.

If companies are sensing a change then why are the advisers still sensing gloom and doom? The City is witnessing quite a change in the stockbroking world. Several firms have merged, others have pulled out of the market altogether. This is three years later than the corporate world which rationalised and down-sized so that it could withstand the effects of the credit crunch and global shifts in economic sentiment. So the advisers are voicing what they are feeling rather than what their corporate clients are experiencing. I wonder whether this aligns with your experience?

As part of our second quarterly QCA/BDO Small and Mid-Cap Sentiment Index survey we asked what companies and advisers wanted to see in the forthcoming Budget. The single most popular policy would be to allow AIM and PLUS-quoted company shares to be included in ISAs – over a quarter of both small to mid-cap quoted companies and advisors believe that this would have the greatest positive impact on business.

The removal of stamp duty on small and mid-cap company shares and reforming capital gains tax relief are also highly desired items to make a Budget appearance.
As I highlighted last month, we asked the small and mid-cap sector what they felt about the Government’s proposals for a binding shareholder vote on executive pay. 52% of small and mid-cap companies do not support the proposal – and comments suggested that many view it as a PR exercise that hasn’t been well thought through. This fit well with our finding that the majority of small and mid-caps believe that regulation is going to increase over the next 12 months.

Our partner in the survey, Scott Knight of BDO, suggested that this “is an opportunity for Government to reframe the shareholder/small and mid-cap relationship towards a longer term more engaged model.” How right. It’s time for the Government to introduce fiscal measures which support their policies.

Tim Ward is chief executive of the Quoted Companies Alliance (QCA), the membership organisation of the small and mid-cap quoted sector. His past roles have included head of issuer services and head of marketing at the London Stock Exchange and finance director at FTSE.