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 Despite a UK national budget looming up and with expectations of an ill thought through increase in capital gains tax, we have seen an increase in confidence levels since October 2009 by both entrepreneurs who judge the timing right to establish or expand their businesses and from investors interested in investing. However we are experiencing an extended completion process as we wait on the final outcome of the budget...

It’s clear that entrepreneurs and private investors are doing their bit to regenerate the economy but this tide of enterprising spirit is in danger of being squandered by policies which whilst well intentioned are designed with limited reference of real life in the small business world. SME’s over the last 30 years have developed a healthy allergy to overheads and reduced them massively. We now have the opportunity for this effort to be matched by new Government with an enlightened approach towards red tape, reporting to government agencies and a more friendly tax burden.

Expected reductions to Regional Development Agencies investment, the lack of capacity by VCT’s and SIPP funds who are no longer attracting investment (because of poor performance levels over the last 5 years) will create a shortfall of funding available to regenerate the country’s economy from new business start ups. Surely the government is not expecting the whole regeneration to be funded by business angels!

Boris Johnson has my sympathy when reported to have failed to turn around the London Development Agency’s finances which I suspect is a mammoth task. Development agencies designed for economic regeneration, hidebound by legislation imposed upon them and having so much responsibility to taxpayers that they add layer after layer of protection to cover their backs against criticism and diversity policies so much so that they become unable to deliver anything to the community or business. Our experience is that they invest on terms which are not economic to entrepreneurs by trying to mimic VC’s large ticket investments in terms of debt structures, and are overly concerned with an extensive due diligence process which is of limited relevance in a start up. Many of the Development Agencies operate with infringements of restrictive practises and anti competition rules which any commercial operator would be prosecuted for.

It seems to me that it would be easy to cut through all of this, do away with the substantial overhead of the RDA and use just a fraction of the £2bn a year spent by them by providing matched funding of say 20% alongside business angel investors. Backing deals negotiated and judged viable by business angels who are investing their own money and time into early stage businesses, would attract same terms of investment and returns as the angel and the spread of risk across a wide number of investments should ensure a healthy return to be reinvested down the line. The whole overhead of managing their investments process is immediately reduced and could be handled by business angel networks such as ourselves charging the entrepreneur a success fee. Differential rates of matched funding could be used for different areas or sectors allowing stimulus to be directed if necessary, but basically keep it simple.

The new government is consulting widely and listening to experienced entrepreneurs and I do hope that if you have the opportunity to make some input on this we will collectively make small business needs heard by those who need to know.

Mike Weaver, Beer & Partners Limited