CBI launches recovery plan for small firms

THE CONFEDERATION of british industry has called for a more adaptable approach to financing to stop small businesses failing through cash-flow problems.

Howard Davies, the organisation's director-general, has set out a small firm recovery plan urging swifter payment of bills by large firms and public bodies, encouraging use of debt collection services by small firms and asking banks to be more willing to swap debt for equity - not just as a last resort.

To encourage investment in small ventures, the CBI wants a replacement for the Business Expansion Scheme. Mr Davies envisages a new scheme under which people could put their money into specific projects through a local investment vehicle. This, he believes, would prevent abuses such as the use of the scheme as a tax haven, for which the BES was widely criticised.

Mr Davies is also asking the venture capital industry to route more of its investment into start-ups, early stage funding and refinancing of bank debt. He said that these sectors took only 11 per cent of the investment by the venture capital community compared with 64 per cent that went to support management buyouts.

The CBI also strongly supported a replacement for the Unlisted Securities Market, which looks likely to be axed by the Stock Exchange. Mr Davies said there must be a cheaper alternative to a full listing, perhaps on US lines.