Regional success will only be achieved if there are effective ways to invest in local businesses, stockbroker Justin Urquhart Stewart has said.
Speaking at an event in Wakefield last week, Seven Investment Management Mr Urquhart Stewart said the closure of local stock exchanges in the 1970s and ‘80s had resulted in money being “sucked” out of regions.
Instead, the Government must develop a mechanism, such as regulated, online crowdfunding, to enable businesses to raise funds and investors to back firms, he said.
In 1945, there were 45 stock exchanges in the UK, including Wakefield and Leeds, which were closed by the late 1980s.
The primary purpose of a stock exchange is to raise cash “in the most cost efficient way possible”.
Mr Urquhart Stewart said smaller businesses were hurt by the centralisation of the UK’s public trading into the London Stock Exchange.
While businesses often complain about a lack of finance from banks, it is not the job of banks to provide capital, he added.
Instead of focusing on existing institutions, there must be a new method of fundraising to ensure people can invest to develop and sustain businesses in the region, he argued.
Mr Urquhart Stewart told the audience at fds Corporate Finance: “A stock exchange is no more than a crowdfunding venture.
“It’s getting people together to raise money for it, it’s just you’re doing it in a way that has some regulation around it and has some advice around it.
“You also make sure you’ve got people who are investing who are responsible investors willing to take a risk. Therefore, you do this online.
“You create mechanisms around the country where people can invest in local businesses.”
While crowdfunding is already available, it now needs “government and regional attention”.
“One issue of the north south divide is designing the mechanism so money isn’t sucked into that hollow that is London, but is enabled to be used regionally.
“If you do that successfully, you create a reputation and you will attract other investment from other areas coming in,” he added.