“British entrepreneurs are being badly let down by a lack of access to financial support,” says Andrew Miller MP, the committee’s chairman, “equity investments have a place , but too many companies are forced into over-reliance on this route because other types of funding are unavailable.”
The lack of affordable credit is preventing start-up UK science-based firms from getting their products to market.
This, says Miller: ‘Often forces them to sell out to private equity investors, or larger foreign companies to get ideas off the ground.”
New jobs and profits are then lost to the UK.
“The UK’s university and science sector is a global success, but the challenge for government is how that world-class academic research can be translated into commercial activity,” says Miller, “I hope the government recognises that it needs to be more proactive if it wants to secure long-term growth and competitiveness in the UK.”
The committee’s report says: ‘The government does not have a coherent strategy to support the commercialisation of technological innovation in the U.K. and is failing to secure the full economic benefits of our world-class science base.’
The committee supports Vince Cable’s plan for selling bonds for medium-sized businesses which can be bought by pension funds. The committee says that pension funds currently do not invest in risky business start-ups because of regulation – which leads to lack of capital.
As usual, it is the banks that are at fault.
Despite government initiatives to increase lending to smaller firms like the Funding for Lending Scheme (FLS) the banks are putting harsh conditions on loans.
‘The committee heard that banks were often requiring entrepreneurs to provide family homes as security to obtain these loans,’ says the report.
Although the banks got $20 bn of cheap loans from the government under the FLS scheme, they cut back on lending in the second half of 2012.