Government urges successor to USM

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THE GOVERNMENT has added its weight to growing pressure on the London Stock Exchange to create a successor body to the Unlisted Securities Market, the junior stock market for fledgling businesses.

Lord Strathclyde, the small firms minister, told the Independent on Sunday: 'I would like to see growing companies being offered a menu that includes some kind of a USM- type market.'

His remarks come as the Stock Exchange launches a wide-ranging review of its listing rules - a move regarded by its critics as a delaying tactic.

The USM is to be abolished by 1996 under European Union rules. The closure has sparked an outcry, as many feel it would stifle an important source of equity finance for growing businesses. The USM was started in 1980 to thwart competition from 'over-the-counter' market-makers.

The controversy forced the Exchange to set up a working party, which last December recommended the creation of a new Enterprise Market.

But instead of implementing the recommendation, the Exchange commissioned the pollsters Mori to conduct market research aimed at assessing support for the replacement.

The poll findings are understood to have been handed to the Exchange about two weeks ago, but the latest review is seen in some quarters as another device to postpone a clear decision. The Exchange's chairman, Sir Andrew Hugh Smith, steps down in July in favour of John Kemp-Welch from Cazenove & Co.

Some believe the review could lead to a premier league of blue-chip companies and a separate market for others.

Many City professionals say the revival of unofficial dealings under the Exchange's Rule 535(2) indicates strong demand for a junior market.

A spokeswoman for the Exchange said: 'We are looking at the USM in a wider context.'

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