Liquidity needed to refresh small firms market

Paul Haddock, head of capital investments at the Plus Markets Group, London's small and mid-cap stock exchange, warned that more needs to be done to boost listed growth companies and encourage large fund managers to return to the stock market.

He said: "The key is to attract a greater degree of liquidity. We have got to get people interested in smaller companies. The government's recent Green Paper – Financing Private Sector Recovery – talks about the role of small and medium-sized companies in getting the economy back on its feet.

"Larger funds have moved away from these markets because they see them as too risky. But there are some great growth opportunities and the funds should be more supportive because these companies are a fundamental part of the UK community. The small companies today are the big companies of tomorrow."

He added: "People are very risk averse but I almost think that people should be risk aware. You don't get anywhere unless you take an element of risk and the government has a role to help."

There are five Yorkshire companies listed on Plus: audio technology company Feonic, based in Hull; software developer Fidelity Systems, also based in Hull, motoring organisation NCI Vehicle Rescue, based in Harrogate; Leeds-based NJD Capital, which acquires minority investments in small private UK companies that require either a capital reconstruction or are about to undergo a change of ownership; and printing firm Team Impression Holdings, based in Leeds.

Some commentators have proposed regional stock exchanges to help develop regionally focused sources of business finance but Mr Haddock believes it would be too expensive with few benefits.

He said: "I don't think the idea is going to get very far. There were regional exchanges a few years ago and they all closed down and migrated to London.

"It's a nice idea to have local funds supporting local companies but there is no reason why that can't happen anyway.

"We also shouldn't underestimate the cost and logistics of setting up regional exchanges."

Plus is organising a broker roadshow in Leeds on Thursday, which is designed to showcase growth company investment opportunities on the exchange.

Private client investment managers, private investors, and retail brokers will have the opportunity to meet and talk with senior management from successful Plus companies around the UK about their businesses and the investment opportunities they offer.

Mr Haddock said: "We are performing an essential role in supporting growth companies. There is a degree of liquidity out there but any new companies have to be able to demonstrate a very good strategy of growth, the right board in place to deliver that strategy and good unique selling points in order to attract investors."

He added: "These roadshow briefings are a key part of a broader initiative by Plus to help raise the profile and visibility of companies on our market and we have seen a positive impact on them through events we held earlier this year in Edinburgh, Manchester and London."

The event will be held over lunch between noon and 14.30. For more information, visit www.plusroadshow.com

Plus Markets Group

There are a total of 166 companies currently listed on Plus, down from a peak of more than 190 two years ago. It has admitted 14 new companies so far this year, compared to 18 the previous year.

A small number of companies have raised around 3.6m in "primary" fundraisings either at floatation or pre-floatation so far in 2010.

The majority of the fundraising activity, however, has been from companies already admitted to the market. There have been 54 rounds of "secondary" fundraisings on the market so far this year, raising almost 12m, compared to 134 rounds of secondary fundraisings for 21m for the full year in 2009.