Early changes boost for small companies

The Quoted Companies Alliance (QCA), the representative body for the UK's small and mid-cap quoted company sector, believes the changes are the tip of the iceberg of what it is trying to achieve, but it's a significant step forward.

The Government has agreed to bring in the two changes early, instead of waiting the full 18 months it has before it has to change the law.

The first change will raise the threshold for which a prospectus is required, from 2.5m euros to 5m euros.

Tim Ward, chief executive of the QCA, said this means small and mid-cap companies can raise up to 5m euros, without having to pay the costs and the time involved with issuing a prospectus.

It should lead to major cost savings for the 100 or so Yorkshire-based small and mid-cap companies.

"It's a much more cost-effective way to raise money," said Mr Ward. "A prospectus needs lawyers and accountants. We estimate it costs between 500,000 and 750,000 for a company to float. So to raise 5m, it would cost 500,000 to 600,000. So 10 per cent of the money raised is going on costs. A lot of this is accounting and legal and then you have printing and brokers' costs."

The second change increases the minimum number of investors for which a prospectus is required from 100 to 150, which means companies can approach 50 more investors than previously.

"This change means companies can send out documents to a lot more people," said Mr Ward.

Mr Ward believes that the new coalition Government is more sympathetic to the needs of small businesses than the Labour Government was.

"They realise that the future of this country depends on companies growing and creating jobs," he said. "The Government is keen to help a sector that is the jewel in the crown of the UK economy.

"It understands that FTSE 100 companies are not creating jobs in the UK at the moment. We need smaller companies to create jobs and take up the slack from the public sector job losses. We need politicians to focus on the part of business that can make a huge difference."

The Government announced the two early changes to the Prospectus Directive as part of a package to develop strong and sustainable economic growth in the UK.

The QCA made its recommendations after close consultation with its members and their advisers, building on a series of roundtable discussions held for HM Treasury officials.

"We fully support the Government's work in trying to improve smaller companies' access to finance," said Mr Ward. "We view this objective as essential in terms of securing economic growth."

Now the QCA has secured this small but significant victory, it plans to turn its attention to the other big issues that will help its members.

One of the most important issues the QCA is working on is lobbying the Government to create a more favourable tax regime.

"We are saying that people who invest in a company for four or five years should get a reduced tax rate of 10 per cent rather than 28 per cent," said Mr Ward.

He added that the QCA is currently talking to treasury officials to plead the case and he is hopeful that the Government will listen.

Another issue is helping investors to find companies they can invest in.

"We want the right investors to get the information they need," said Mr Ward. "For too long, we have had regulations that are keeping investors away.

"We want to incentivise investors to put their money where it can have the best improvement for the economy."

At a time when small and mid-cap companies can make such a huge difference to the fortunes of the UK economy, the QCA is working hard to get rid of some of the red tape that has previously held these companies back.

The Quoted Companies Alliance (QCA) represents the UK's small and mid-cap quoted companies.

This sector is defined as the 2,000 companies that are quoted in the UK outside of the FTSE 350, the UK's biggest 350 Plcs.

The QCA was set up to promote the interests of its members.