'SMEs are the innovative spear of our economy'
The former head of the London Stock Exchange Group is calling for a national capital markets plan to provide new sources of funding for Britain’s army of small and medium-sized businesses.
In an exclusive interview with The Star set up by our guest editor, Xavier Rolet said many SMEs were weighed down by bank debt before the pandemic.
They should now “recalibrate” their balance sheets to get through the Covid crisis and be able to grow as the recovery kicks in, he added.
Mr Rolet said: “We are not out of the woods but at some point we will be. We need to make preparations to avail ourselves of the tremendous employment creation engine represented by SMEs. They are the innovative spear of the economy.”
As CEO of the London Stock Exchange Group from 2009-18, he was responsible for one of the world’s largest capital markets and helped stabilise the global economy after the financial and sovereign debt crises.
Mr Rolet said SMEs need easy access to different types of funding beyond bank debt such as private equity, venture capital and stock market listing.
He suggested a national capital markets ecosystem could be supported by the Sheffield-based British Business Bank working with Local Enterprise Partnerships and the UK’s brokerage industry.
The Treasury could help by reducing the heavy burden of taxation on equity, given that debt is tax deductible, he added.
French-born Mr Rolet started his career at Goldman Sachs and went on to hold senior roles in investment banking before joining LSEG. He is now chairman of Shore Capital and is on a number of global boards.
Mr Rolet said a lot of people ask him why equity markets are performing so strongly when major economies are facing 10 per cent GDP hits and massive spikes in unemployment.
He said the stock indices tend to capture larger companies, which are benefiting from cheap borrowing costs and able to strengthen their market share by buying up smaller rivals. At the same time, the cost of labour is being held down by high unemployment.
Mr Rolet added: “These are not unfavourable conditions. We need to ensure some of that benefits SMEs because they represent the bulk of employment creation.