A little help for Liam Byrne here

Mr. Byrne - yea he of “There’s no money left” - is pondering (in committee and therefore ponderously) why the British financial markets don’t fund British business. We have some advice:

That model is failing. The retreat of traditional finance has left a hole in lending to small and medium-sized enterprises (SMEs). Many venerable banks have simply stepped back from risk. As Adair Turner has eloquently highlighted, our banks have stopped backing our risk takers, preferring the quieter waters of financing property and mortgages. Public markets are shrinking, not surging. The London Stock Exchange is no longer the engine of growth it once was, and everyday savers are locked out of the upside from gains in private markets.

There’s nothing there that the Wilson Report of 1979 wouldn’t recognise.

The easiest point for us to make is about those private markets. Why are businesses turning to them for finance? Because it’s too expensive - too great a cost of meeting the regulatory burden - to try to raise money on the public markets. This next will sound like a joke but it isn’t - it’s actually necessary to raise capital first in order to be able to go through the process of filling out the forms to raise capital on public markets. It also takes too long of course.

Reduce that regulatory burden and more companies - even just ideas - will try to gain financing from the public markets.

True, true, that will increase the number of scams going on, the receipts of the flybynights as well. But everything is a trade off - yea even how many get fleeced in return for how much of British industry gets financed. Our analysis, controversial as it may be, is that the costs of raising public money have risen too high for public money to be habitually raised.

So, lower those costs and see the situation change.

We’d also note that the current costs and processes do not stop the flybynights. There are two we’ve noted out there and even tried to report but have got nowhere. One is a guy out of Ireland trying to revive this decade old rare earths investing scam. The other is someone impersonating one of us on WhatsApp. Just to be clear, Tim Worstall does not run an investing group on WhatsApp. Tim Worstall does not run an investing group anywhere. Anyone claiming to be Tim Worstall running an investment group on WhatsApp is lying. Trying to report that to WhatsApp gets into loop of AI driven “this ticket is now closed” nonsense. Reporting the rare earth guy to the City of London police hasn’t got any further either.

That is, the current strictures don’t in fact make the investing space clean anyway. Not that we’d expect a committee run by Mr. Byrne to come down on the side of less bureaucracy and regulation but there’s always hope eh, that thing with feathers?

Tim Worstall