Outlook: Another review

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The Independent Online
THE PLIGHT of Britain's smaller publicly quoted companies has become a a subject of much breast beating in recent years. As fund managers target Blue Chip stocks and the growing ranks of tracker funds do the same, the smaller caps seem to be withering away through neglect. Many have given up the ghost and gone private.

That the government is now wading into this debate on the `Something Must Be Done' ticket, should therefore come as no surprise. The DTI has set up a committee led by bookseller Tim Waterstone to look into the issue with the CBI and the Birmingham Chamber of Commerce also getting in on the act.

But should they bother and what can they do?

One thing they can certainly improve on is their timing. While the number of going privates has certainly increased this year the real crisis in the sector was two years ago. This year the FTSE Small Cap index is the best performing part of the entire market. Exploiting these occasional anomalies is what stock market investing is all about.

But if the government really wants to meddle there are some issues that could be addressed quite easily. One is the abolition of capital gains tax, which is more onerous here than in any other developed market and along with stamp duty, one of the biggest deterrents to direct investment in the stock market by retail investors, the natural investment constituency of small, fast growth companies.

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