A Conservative MP has called for the UK government to invest £15bn in small and medium sized enterprises (SMEs) in exchange for shares.
Published on behalf of thinktank the Social Market Foundation, the report explores ways of “delivering transformative growth” once the Covid-19 virus is fully under control.
The report, written by Conservative MP for Hitchin and Harpenden Bim Afolami, recommends that the UK government invest £15bn in shares of British businesses, that could then be sold to the British public through the London Stock Exchange.
This “recovery fund” would take equity stakes in the companies, and is intended to benefit SMEs, with many hit hard by the Covid-19 pandemic.
The fund, which would be administered by a new division of the British Business Bank, would be allocated to a range of FCA-regulated fund managers, who would then choose where to invest the money.
The UK government has already created the Business Interruption Loans sceme, which enables SMEs to access loans of up to £5m. According to research by Aldermore bank, small and medium-sized businesses are expected to borrow £48.3bn in total to keep businesses afloat in the wake of the pandemic.
Once the Future Fund is floated on the London Stock Exchange after three to four years, Afolami recommends that NHS frontline workers and and people aged 18–30 should be offered a “heavy discount” on shares, focused on those who earn below £30,000 a year.
Afolami, a former HSBC employee and member of the SMF’s cross-party advisory board, is expected to raise the Recovery Fund plan in the House of Commons today.
Bim Afolami MP said:
“We should use the financial power of the state to provide short-term support for small and medium-sized British companies, then in the long term to widen ownership of British business and give more people a stake in the economy. This plan would deliver a strong recovery and a fair economy.
“The Recovery Fund wouldn’t involve politicians picking winners, it would use professional fund managers to invest the money where it would do the most good, in exchange for the Treasury getting a share of the firms that are supported.
“Then when the recovery is secure, the government would get its money back by selling shares in the Recovery Fund with young people and NHS staff at the front of the queue.”
Other ideas presented in the report as options to help “Britain to flourish economically after the immediate crisis” include abolishing district councils, introducing a “Future Town Centre” to support high streets and urban housing, writing off the student debt of those who work in STEM occupations, encouraging pro-competitive regulation, the Bank of England setting a nominal GDP level target, and for private schools and universities should provide all their digital courses to state schools for free.
Afolami also recommends making it easier for individuals to invest in British businesses, which he predicts could inject £6 billion into British SMEs without raising new money from public or private sector.