To ask the Secretary of State for Business, Innovation and Skills what assessment his Department has made of the barriers to young innovative firms obtaining equity finance.

The Department regularly assesses the barriers for small and medium-sized enterprises (SMEs) raising equity finance by monitoring investment statistics and research produced by external organisations such as the British Private Equity and Venture Capital Association, European Venture Capital Association and National Endowment for Science, Technology and the Arts. We recognise that access to finance is critical for businesses to survive and grow and that small and medium-sized companies face particular challenges.

In 2009, the Department published research undertaken by SQW Consulting which explored the existence and size of the equity gap affecting SMEs (‘The Supply of Equity Finance to SMEs: Revisiting the Equity Gap’). This research found the equity gap stretched for funding amounts of £250,000 to at least £2 million (with some putting the ceiling at £5 million) for the majority of SMEs seeking equity finance. However, in the case of sectors requiring complex research and development or large capital expenditure, the gap may extend up to £15 million.

The Department has also undertaken a number of public consultations, including ‘Financing a private sector recovery’, which asks about conditions affecting SMEs raising equity finance.