Small talk: Growth fund creates happy mediums

That Britain is not an entrepreneurial nation has become a received wisdom – the theme underlies much of the current drive to encourage more people to start their own businesses, as policymakers look to small and medium-sized enterprises (SMEs) to drive the recovery. But the truth is that Britons are pretty good at starting businesses – last year around 460,000 people did so, around the same number as in Germany per capita.

What we're less good at is turning start-ups into real engines of growth. But you wouldn't guess that was the problem from the focus of most SME policy initiatives on the first letter of the acronym. Start-ups grab the lion's share of help (and a disproportionate amount of media attention too).

That's to the detriment of medium-sized businesses – unfortunate given these companies already have track records of success and could become much larger employers, with a bit more support. The Business Growth Fund, set up last year to invest in such enterprises – one of the few policy initiatives in this sector – reckons there are 25,000 of them. A fifth are growing at 10 per cent a year or more.

What is stopping these medium-sized firms becoming large enterprises? It's not the credit crisis – or not only that. Just as big a problem has been the disappearance of the development capital industry over the past two decades. There was a time when all our large banks, as well as many independents, regularly took capital in businesses identified as the stars of tomorrow. But that model was superseded by the private equity phenomenon, as leveraged buyouts appeared to offer superior returns to straightforward equity stakes.

When the supply of credit was bountiful, the demise of development capital was masked. But in a post credit-crisis world, those 25,000 businesses have discovered there is no-one else to turn to for capital.

It is good news, therefore, that after a relatively slow start – it has been running for a year – the growth fund is stepping up the pace. Last week, it announced its eighth investment, a £3.85m injection of capital into Glasgow-based manufacturer M Squared Lasers. It's a typical example of the fund's mandate to invest between £2m and £10m in companies in return for a stake of at least 10 per cent, but never a controlling interest.

The aim is to turn the fund into the sort of organisation that 3i once was. And with £2.5bn of capital commitments from the banks – assuming they make good on them – it stands a chance. Executives at the fund reckon it could make 25 investments a year once it really gets going – not bad given that just 40 companies in its target universe have managed to attract any development capital from the private sector over the past year.

These companies are the British equivalent of Germany's Mittelstand firms, the SMEs credited with having carried that country's economy over the past 50 years. A rebalancing of Britain's SME policy towards this type of enterprise is overdue.

Orogen sees future in old Serbian sites

If you're looking for gold, it makes sense to start where others have already found it. Alternative Investment Market-listed Orogen Gold, has just published the results of sampling work suggesting there is still high-grade gold in two Serbian mines in which it owns a share. The mines haven't been touched since 1938.

Orogen has spent a year mapping the mines' historic development and evaluating whether they have fresh commercial potential. Today's results suggest there's a good chance of a positive outcome, though the company warns more work needs to be done.

House broker Xcap is bullish. Analyst Sam Brindle says: "With a packed summer exploration season these are exciting times for Orogen."

More deals 'in pipeline' for Waterlogic

Waterlogic, the drinking water dispenser company featured in Small Talk in February, is on the move. Having made its debut on the Alternative Investment Market last year, Waterlogic has just published its maiden results – earnings were up 17 per cent to $13.4m (£8.3m). Indeed, the company beat brokers' forecasts on every metric.

Liberum, the company's house broker, tips it to announce "a string of contract wins" in the coming months, with deals in the pipeline in both the consumer and business market. Talks over a joint venture with a water treatment company are also advanced and Waterlogic is particularly excited about its Firewall ultra-violet technology. This kills off just about every virus or bacteria you're likely to find – handy since Waterlogic's equipment plugs into your supply rather than relying on bottles that constantly need to be replaced.

Currently trading at 185.5p (against 172p when Small Talk last featured the company), Waterlogic shares have plenty of upside, Liberum argues. It has just raised its target price for the stock from to 221p to 233p.

Consultants hail switch overseas

David Richards, chief executive, SLR

When we set up our company, the UK market for our business, environmental consultancy, was booming and we grew quickly. Then, in 2008, we realised the UK was going to be increasingly difficult, particularly with the construction industry at a standstill, and we began looking beyond the UK for high-growth markets. We made acquisitions in Australia, North America and South Africa.

In three years, we've gone from making 70 per cent of sales in the UK to 70 per cent overseas, by targeting economies driven by the resources boom. We provide services such as helping companies through the process of gaining permissions to mine or drill, and assessing projects' environmental impact. It seems to have worked – sales were up 24 per cent last year and our earnings were a record for the company.

Suggested Topics
News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
News
news
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
New Articles
i100... with this review
PROMOTED VIDEO
Voices
Holly's review of Peterborough's Pizza Express quickly went viral on social media
Sport
footballTim Sherwood: This might be th match to wake up Manchester City
Arts and Entertainment
musicHow female vocalists are now writing their own hits
New Articles
i100
News
ebooksAn unforgettable anthology of contemporary reportage
News
news
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
News
Blahnik says: 'I think I understand the English more than they do themselves'
people
Arts and Entertainment
Michelle Dockery as Lady Mary Crawley in Downton Abbey
TVInside Downton Abbey series 5
Life and Style
The term 'normcore' was given the oxygen of publicity by New York magazine during the autumn/winter shows in Paris in February
fashionWhen is a trend a non-trend? When it's Normcore, since you ask
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam