Britain’s future rests with our best and brightest small businesses

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The future of Britain’s best and brightest small and medium sized businesses will in turn determine that economic health (Creative Commons)

The economy has always been pivotal in deciding the outcome of general elections in post-war Britain.

Next month’s election will be no different. The economy will be a key factor in how we all vote. And the future of Britain’s best and brightest small and medium sized businesses will in turn determine that economic health.

There are 4 million British SMEs that have an overwhelmingly positive effect on the health of the UK economy, job creation and the nation’s ability to innovate. We all need to care about what happens to these saviours of our future.

Many of the initiatives introduced by the last Government to support entrepreneurs and small businesses have been transformative. These initiatives have provided better access to finance, nurtured seedling enterprises and have helped to deliver economic growth.

Big business has a key role to play alongside government in helping to build on the success of the past few years: This week, the London Stock Exchange Group launches its next cohort of "Elite" companies. Elite offers businesses a full programme to help them grow, including education and direct contact with Europe’s financial and advisory community. Managements are guided on how best to fast-track their development and capital raising processes, how to access the most suitable funding, and given advice on building their profile and reach.

This election is important for these stars of tomorrow. As much as they need partners in the business world, they need a strong partner in government – a government that wants to support them and see them prosper.

The challenge for any new government will be to maintain momentum and develop further a supportive environment for high-growth businesses like these Elite companies. The new government will need to ensure that SMEs can continue to access the finance they need to grow, developing from million-pound start-ups to billion-pound stars. It won’t be the big blue-chip companies that create the jobs: it will be the small businesses.

A record 500,000 new business start-ups emerged in Britain last year. The London Stock Exchange Group’s recent "1,000 Companies to Inspire Britain" publication found that some of the fastest-growing companies across the UK were not only in the digital and technology sector but also in the manufacturing, construction and engineering industries.

A subset of the UK’s 4 million SMEs have been identified as "the magic 6 per cent" or "scale-ups" that are particularly important to economic growth and job creation. It has been estimated that boosting these SMEs would create as many as 230,000 new jobs and add £38bn to UK GDP. We need to apply a multiplier effect to this "magic 6 per cent".

We need to build an ecosystem that promotes the right type of funding for companies looking to scale up. Measures to provide SMEs with greater access to a wider range of risk capital have already yielded impressive results.

Bank lending is not the only answer. North America is the global leader in innovation – and a key reason for this is that people, business and government are willing to back great ideas – not with debt but with equity. Risk capital in the form of equity is, for small businesses, often the most suitable way to finance growth. The decision made by the Chancellor in 2013 to abolish stamp duty on the purchase of shares in growth companies has been transformative. This was followed swiftly by a move to widen the eligibility of Isa investments to include Aim stocks.

These moves, which received cross-party support, were and are game-changing for British business and the UK. They have encouraged investment in high-growth companies, which in turn has lowered the cost of capital for companies looking to raise money and grow.

£4.4bn of Isa investments has been moved to support high-growth SMEs (Getty Images)

This is what the UK needs.

Since this change in tax policy, £4.4bn of Isa investments has been moved to support high-growth SMEs. The number of SMEs raising capital via initial public offerings (IPOs) has increased significantly. In 2014, London had 80 growth market IPOs on Aim, raising £2.8bn with an average IPO of £35m, injecting vital capital to UK SMEs.

Independent research by Grant Thornton showed that 3,580 companies have raised money over the past two decades on Aim, adding £14.7bn to UK GDP, supporting 430,000 jobs and paying £2.3bn in tax.

These statistics are real – they show real delivery on promises to kickstart our economy, following one of the most frightening recessions in recent memory.

The next government needs to continue on the current path. Global support for SMEs is well understood as a driver of economic success. In France, for example, the courageous efforts by Emmanuel Macron – Minister of the Economy – to reverse anti-business rhetoric have sent a clear message in support of SMEs.

Our new government must build on the momentum that has been achieved since the end of the financial crisis and not put the successes of recent years at risk. Government must help deliver for Britain’s entrepreneurs and small businesses. As voters, as those who have gone before did, we need to once again put the economy and business high on our agenda.

Xavier Rolet is the chief executive of the London Stock Exchange Group